Gross Profit

Gross Profit (Definition)

Gross profit is the profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services.

Key aspects of gross profit include:

1. Calculated as total revenue minus cost of goods sold (COGS)
2. Does not take into account operating expenses, interest, or taxes
3. Important indicator of a companys efficiency in producing its goods or services
4. Used to calculate gross profit margin, a key profitability ratio
5. Helps in assessing pricing strategies and production costs
6. Can be used to compare profitability between different product lines or with competitors
7. Higher gross profit generally indicates better efficiency and profitability

Understanding gross profit is crucial for assessing a companys core profitability and operational efficiency.