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:
“In the gross and scope of mine opinion,
This bodes some strange eruption to our state.”
—William Shakespeare (1564–1616)
“What men have called friendship is only a social arrangement, a mutual adjustment of interests, an interchange of services given and received; it is, in sum, simply a business from which those involved propose to derive a steady profit for their own self-love.”
—François, Duc De La Rochefoucauld (1613–1680)