You are here

What is Gross Profit?

Definition: Refers to the difference between earned revenue and the cost of making a product or producing a service. This is not equivalent to operating profit.
Cost of goods sold is deducted from net sales in order to find gross profit. This figure represents how much money there is to cover all the operating expenses (costs) prior to turning a profit.

Operating profit

Represents the earnings before interest and taxes are deducted.

Do not confuse Gross Profit with Net Income. Net Income = Gross Profit – Total Operating Expenses.

Keep in mind that Cost of Goods sold is calculated differently for merchandising and manufacturing businesses.


Try reviso for free for 14 days

Reviso is a cloud accounting platform providing efficient online collaboration between small businesses and accountants.

Choose between two different trials, both containing all the core features of our accounting system. One of the trials is without data and can be upgraded to a subscription within the 14 days period.