In accounting, gross profit or sales profit is the difference between revenue and the cost of making a product or providing a service, before deducting overhead, payroll, taxation, and interest payments. Note that this is different from operating profit (earnings before interest and taxes).
The various deductions (and their corresponding metrics) leading from Net sales to Net income are as follow:
- Net sales = Gross sales - (Customer Discounts, Returns, Allowances)
- Gross profit = Net sales - Cost of goods sold
- Operating Profit = Gross Profit - Total operating expenses
- Net income (or Net profit) = Operating Profit – taxes – interest
(Note: cost of goods sold is calculated differently for a merchandising business than for a manufacturer.)
Famous quotes containing the words gross and/or profit:
“In the gross and scope of mine opinion,
This bodes some strange eruption to our state.”
—William Shakespeare (1564–1616)
“All schools, all colleges, have two great functions; to confer, and to conceal, valuable knowledge. The theological knowledge which they conceal cannot justly be regarded as less valuable than that which they reveal. That is, when a man is buying a basket of strawberries it can profit him to know that the bottom half of it is rotten.”
—Mark Twain [Samuel Langhorne Clemens] (1835–1910)