Gross Profit

Definition

Revenue minus the direct cost of the goods or services sold. It is an amount of profit before other operating expenses, whereas gross margin usually expresses that amount as a percentage of revenue.

Gross profit shows how much money is left from sales to cover costs such as marketing and administration. It can improve when a company raises its prices or lowers the direct cost of what it sells. Dividing gross profit by revenue gives gross margin.

Example

Company A makes $2,000 in sales, and the shirts it sold cost $800 to make. Its gross profit is $1,200.