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Definition and Examples of

Gross Profit

Explanation: 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. It’s calculated as sales revenue minus the cost of goods sold (COGS).

Example: If your handmade jewelry business makes $100,000 in sales and the COGS is $40,000, the gross profit is $60,000.

Potential Issues: Misreporting gross profit can distort a business’s understanding of its production efficiency and profitability.

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