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:
“There are moods in which one feels the impulse to enter a tacit protest against too gross an appetite for pure aesthetics in this starving and sinning world. One turns half away, musingly, from certain beautiful useless things.”
—Henry James (1843–1916)
“Phlebas the Phoenician, a fortnight dead,
Forgot the cry of gulls, and the deep sea swell
And the profit and loss.”
—T.S. (Thomas Stearns)