Gross profit is the profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services.
Gross Profit is one of the most important measures to determine the profitability and the financial performance of a business. It reflects the efficiency of a business in terms of making use of its labor, raw material and other supplies.
Formula to calculate gross profit.
Sales involves all activities involved in selling a product or service to a consumer or business.
Cost of goods sold (COGS) refers to the direct costs of producing the goods sold by a company.
Example:
A firm recorded a total sales amounting to $ 1,000,000. The cost of goods sold was $ 400,000. Calculate the gross profit of the firm.
Therefore, the gross profit of the firm is $ 600,000.
