Gross Profit

What is left from revenue after subtracting the direct cost of the goods or services sold.

Part of the Reading Financial Statements course · Lesson 4 of 33

Formula

Revenue − Cost of Goods Sold

What it is

Gross profit is revenue minus cost of goods sold. It measures how much money a company keeps from each sale before paying for overhead, marketing, research, interest, and taxes. Expressed as a percentage of revenue it is called gross margin.

Why it matters

Gross profit shows the basic economics of a company's products: high gross margin signals pricing power or low production cost, while thin margins leave little room to cover other expenses. A pitfall is comparing gross margin across industries, since a software firm and a grocer have structurally different cost bases.

How it's calculated

Subtract cost of goods sold from revenue; gross margin divides that result by revenue.

How Quintarthai uses it

Gross profit and gross margin appear in the income statement on the Financials tab and the profitability section of the Ratios tab of each company page.

Cross-border note. Because IFRS and US GAAP define revenue and direct costs similarly, gross profit is generally comparable between Canadian and US companies in the same industry.

FAQ

What is the difference between gross profit and gross margin?

Gross profit is a dollar amount (revenue minus COGS), while gross margin is that same figure expressed as a percentage of revenue.

Is gross profit the same as operating income?

No. Gross profit comes before operating expenses like marketing and administration; operating income subtracts those as well.

See Gross Profit on a real company

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