Definition
Gross profit is revenue minus cost of goods sold (COGS). It represents profit before operating expenses, interest, and taxes. Gross margin (gross profit / revenue) indicates pricing power and production efficiency. Higher gross margins typically indicate competitive advantages.
Formula
Gross Profit = Revenue - Cost of Goods Sold (COGS)
Example
A company with $100M revenue and $35M in COGS has gross profit of $65M and gross margin of 65%. Software companies often have 70-80% gross margins.
FAQ
What is Gross Profit?
Revenue minus the direct costs of producing goods or services.
How do you calculate Gross Profit?
A common formula for Gross Profit is: Gross Profit = Revenue - Cost of Goods Sold (COGS)
Why is Gross Profit important?
Gross Profit helps investors evaluate financial statements and make more informed decisions.