Gross Profit is the profit a company makes after deducting the costs of production (or the costs that allow the services to take place) from the net sales amount. Gross Profit is also called sales profit, sales credit or gross income. It only takes into account variable costs and disregards fixed costs such as building rent, marketing expenses, salaries etc.
Gross Profit will appear on a company’s income statement and is a company’s profit before operating expenses, interest payments and taxes. It can be calculated as below:
Gross Profit = Revenue – Cost of Goods Sold
- Sales Profit
- Sales Credit
- Gross Income