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:
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introspective as a leper, enchanted
by a repulsive clew,
a gross and fugitive movement of the limbs.
Is this the love that shook the lights to flame?”
—Muriel Rukeyser (1913–1980)
“Grant me profits only, grant me the joy of profit made,
and see to it that I enjoy cheating the buyer!”
—Ovid (Publius Ovidius Naso)