gross profit

(noun)

The difference between net sales and the cost of goods sold.

Related Terms

Examples of gross profit in the following topics:

  • Profit Margin

    • Profit margin measures the amount of profit a company earns from its sales and is calculated by dividing profit (gross or net) by sales.
    • Since there are two types of profit (gross and net), there are two types of profit margin calculations.
    • Net profit is the gross profit minus all other expenses.
    • The gross profit margin calculation uses gross profit and the net profit margin calculation uses net profit .
    • The percentage of net profit (gross profit minus all other expenses) earned on a company's sales.

  • Ratio Analysis and EPS

    • Profitability ratios measure the firm's use of its assets and control of its expenses to generate an acceptable rate of return.
    • Gross margin, Gross profit margin or Gross Profit Rate: Gross profit / Net sales
    • Profit margin, net margin or net profit margin: Net profit / Net sales
    • Ratio analysis includes profitability ratios, activity (efficiency) ratios, debt ratios, liquidity ratios and market (value) ratios

  • Defining the Income Statement

    • Income statement, also referred to as profit and loss statement (P&L), revenue statement, statement of financial performance, earnings statement, operating statement or statement of operations, is a company's financial statement that indicates how the revenue (cash or credit sales of products and services before expenses are taken out) is transformed into the net income (the result after all revenues and expenses have been accounted for, also known as Net Profit or "bottom line").
    • The more complex Multi-Step income statement (as the name implies) takes several steps to find the bottom line, starting with the gross profit.
    • It then calculates operating expenses and, when deducted from the gross profit, yields income from operations.

  • Income Statements

    • Income statement (also referred to as profit and loss statement [P&L]), revenue statement, a statement of financial performance, an earnings statement, an operating statement, or statement of operations) is a company's financial statement.
    • The Multi-Step income statement (as the name implies) takes several steps to find the bottom line, starting with the gross profit.
    • It then calculates operating expenses and, when deducted from the gross profit, yields income from operations.
    • This often is referred to as gross revenue or sales revenue.
    • Since this forms the last line of the income statement, it is informally called "bottom line. " It is important to investors as it represents the profit for the year attributable to the shareholders.

  • Elements of the Income Statement

    • The income statement, or profit and loss statement (P&L), reports a company's revenue, expenses, and net income over a period of time.
    • It is also known as the profit and loss statement (P&L), statement of operations, or statement of earnings.
    • First, operating expenses are subtracted from gross profit.
    • It is often referred to as gross revenue or sales revenue.
    • It is important to investors as it represents the profit for the year attributable to the shareholders.

  • Overview of Convertible Securities

    • Tax advantages: a high tax-paying shareholder can benefit from the company securitizing gross future income on a convertible income that it can offset against taxable profits.
    • Arbitrage is the simultaneous purchase and sale of an asset in order to profit from a difference in the price.

  • Sales Forecast Input

    • For financial ratios that use income statement sales values, "sales" refers to net sales, not gross sales.
    • Gross sales are the sum of all sales during a time period.
    • Net sales are gross sales minus sales returns, sales allowances, and sales discounts.
    • Gross sales do not normally appear on an income statement.
    • The purpose of profit-based sales target metrics is to ensure that marketing and sales objectives mesh with profit targets.

  • Recording Sales

    • Net sales are gross sales minus sales returns, sales allowances, and sales discounts.
    • In financial ratios that use income statement sales values, "sales" refers to net sales, not gross sales.
    • Gross sales are the sum of all sales during a time period.
    • Net sales are gross sales minus sales returns, sales allowances, and sales discounts.
    • Gross sales do not normally appear on an income statement.

  • Total Assets Turnover Ratio

    • Companies with low profit margins tend to have high asset turnover, while those with high profit margins have low asset turnover.
    • In financial ratios that use income statement sales values, "sales" refers to net sales, not gross sales.

  • Tax Deductions

    • However, to be deducted, the expenses must be incurred in furthering the business, such as it must contribute to profit.
    • Expenses incurred in order to generate profit for a company are referred to as business expenses.
    • This can be considered an expense or simply a reduction in gross income, which is the starting point for determining Federal and state income tax.
    • Generally, this business must be regular, continuous, substantial, and entered into with an expectation of profit.