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 is not a more disgusting spectacle under the sun than our subserviency to British criticism. It is disgusting, first, because it is truckling, servile, pusillanimous—secondly, because of its gross irrationality. We know the British to bear us little but ill will—we know that, in no case do they utter unbiased opinions of American books ... we know all this, and yet, day after day, submit our necks to the degrading yoke of the crudest opinion that emanates from the fatherland.”
—Edgar Allan Poe (1809–1845)
“Throughout the history of commercial life nobody has ever quite liked the commission man. His function is too vague, his presence always seems one too many, his profit looks too easy, and even when you admit that he has a necessary function, you feel that this function is, as it were, a personification of something that in an ethical society would not need to exist. If people could deal with one another honestly, they would not need agents.”
—Raymond Chandler (1888–1959)