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).
Net sales are calculated:
- Net sales = Sales – Sales returns and allowances.
Gross profit is found by deducting the cost of goods sold:
- Gross profit = Net sales – Cost of goods sold.
Gross profit should not be confused with net income:
- Net income = Gross profit – Total operating expenses.
Cost of goods sold is calculated differently for merchandising business than for a manufacturer.
See also
- EBITDA
- Profit margin, the ratio of net income to net sales
External links
Categories: Corporate finance | Generally Accepted Accounting Principles
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