Gross profit

Gross profit is the profit that a company earns after deducting all the costs associated with manufacturing the firm’s product from the sales/revenue/turnover. 

The formula is: Gross profit = Revenue – cost of goods sold

Cost of goods sold include labour/manpower charges, raw material cost, the factory overheads. However, cost of goods does not include marketing and distribution expenditure. 

What is Gross profit margin?

Gross profit margin is the percentage of gross profits over net revenues. 

Difference between Gross profit and Net profit

While calculating Gross Profit only manufacturing expenses are deducted from Net Sales but while calculating Net profit, operating expenses, administrative expenses, Interest expenses and Tax expenses are also deducted. 

What is Gross Profit Ratio?It is used to assess the operational performance of the business.