Definition
Gross profit is the difference between the purchase price of an item (cost of goods sold) and the sale price. [1]
Gross profit = Net sales – Cost of goods sold
Gross profit assesses a company’s efficiency in using labor and supplies to produce goods or services. Unlike net income, gross profit doesn’t include fixed costs – expenses that must be paid regardless of the output level. [2]
See Also
Gross margin
Gross margin return on inventory investment
References
- American Marketing Association, AMA Dictionary.
- Investopedia, investopedia.com/terms/g/grossprofit.asp