Gross Profit

Gross Profit is the difference between Revenue and the Cost of Goods Sold (COGS). It reflects the amount of Money a company makes from its sales after deducting the costs associated with producing its goods or services. Gross profit does not account for other expenses such as Operating Expenses, taxes, or interest.

Formula: Gross Profit = Revenue – Cost of Goods Sold

Example:

• If a company sells 1,000 units of a product for $50 each, the total Revenue is $50,000.
• If the cost to produce each unit is $30, then the total COGS is $30,000.
• Gross Profit = $50,000 – $30,000 = $20,000.

Case: A clothing retailer generates $200,000 in sales over a quarter. The COGS for the clothing items sold is $120,000. The gross profit for the quarter would be calculated as follows:

• Gross Profit = $200,000 – $120,000 = $80,000.