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Gross Profit
Definition
Gross profit is revenue minus the cost of goods sold (COGS), representing the direct profit from producing and selling products.
Explanation
Gross profit shows how efficiently a business produces its products or services. Gross profit margin = Gross Profit / Revenue × 100. A healthy gross profit margin covers operating expenses and leaves room for net profit.
Gross profit is the first profitability metric on an income statement. Tracking gross profit trends helps identify pricing, production, or supply chain issues early.
Example
A bakery with $200,000 in revenue and $80,000 in ingredients and direct labor has a gross profit of $120,000 (60% margin).