Gross Profit
View All TermsGross Profit is the different between the sale prices and the cost of buying or producing the goods. It is calculated as
Gross Profit = {Revenue} - {Cost of Goods Sold}
Gross Profit is the numerator in the calculation of Gross Margin:
{Gross margin}
= {Gross Profit} / {Revenue}
= ({Revenue} - {Cost of Goods Sold}) / {Revenue}
A positive Gross Profit is only the first step for a company to make a net profit. The gross profit needs to be big enough to also cover related labor, equipment, rental, marketing/advertising, research and development and a lot of other costs in selling the products.
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