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:
“How fearful
And dizzy ‘tis, to cast one’s eyes so low!
The crows and choughs that wing the midway air
Show scarce so gross as beetles. Half way down
Hangs one that gathers samphire, dreadful trade!”
—William Shakespeare (1564–1616)
“Madness is tonic and invigorating. It makes the sane more sane. The only ones who are unable to profit by it are the insane.”
—Henry Miller (1891–1980)