{"id":28585,"date":"2023-10-16T13:44:49","date_gmt":"2023-10-16T13:44:49","guid":{"rendered":"https:\/\/swoopfunding.com\/ca\/?post_type=business-glossary&#038;p=28585"},"modified":"2025-04-24T13:53:11","modified_gmt":"2025-04-24T13:53:11","slug":"gross-profit","status":"publish","type":"business-glossary","link":"https:\/\/swoopfunding.com\/ca\/business-glossary\/gross-profit\/","title":{"rendered":"Gross profit"},"content":{"rendered":"<h3>Definition<\/h3>\n<p><span style=\"font-weight: 400;\">Gross profit is a financial metric that represents the revenue a company earns from its core operations minus the direct costs associated with producing or providing the goods or services sold.\u00a0<\/span><\/p>\n<h3>What is gross profit?<\/h3>\n<p><span style=\"font-weight: 400;\">This metric provides a measure of the profitability of a company&#8217;s primary business activities before accounting for indirect expenses such as <a href=\"https:\/\/swoopfunding.com\/ca\/business-glossary\/operating-costs\/\">operating costs<\/a>, interest, and taxes.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Gross profit is calculated using the following formula:<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Gross profit = revenue &#8211; cost of goods sold (COGS)<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The gross profit can also be expressed as a percentage, known as gross profit margin. It is calculated using the formula:<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Gross profit margin = (gross profit \/ revenue) x 100%<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This provides a standardised measure of profitability, making it easier to compare companies of different sizes and industries.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">A higher gross profit indicates that a company is retaining a larger portion of its revenue after accounting for direct production costs. This suggests strong operational efficiency in producing or providing goods and services. On the other hand, a lower gross profit may indicate higher production costs relative to revenue, which can potentially impact overall profitability.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Gross profit does not take into account all expenses, and thus, it provides an incomplete view of a company&#8217;s overall profitability.<\/span><\/p>\n<h3>Example of gross profit<\/h3>\n<p>Let&#8217;s consider Company ABC, a clothing retailer, for a specific quarter. In this period, the company has the following financial information:<\/p>\n<ul>\n<li><strong>Total revenue:<\/strong> $800,000<\/li>\n<li><strong>Cost of goods old (COGS):<\/strong> $400,000<\/li>\n<\/ul>\n<p>Using the formula, gross profit can be calculated as:<\/p>\n<p><span class=\"math math-inline\"><span class=\"katex\"><span class=\"katex-mathml\">Gross profit = $<\/span><span class=\"katex-html\" aria-hidden=\"true\"><span class=\"base\"><span class=\"mord\">800<\/span><span class=\"mpunct\">,<\/span><span class=\"mord\">000 <\/span><span class=\"mbin\">\u2212 $<\/span><\/span><span class=\"base\"><span class=\"mord\">400<\/span><span class=\"mpunct\">,<\/span><span class=\"mord\">000 <\/span><span class=\"mrel\">= $<\/span><\/span><span class=\"base\"><span class=\"mord\">400<\/span><span class=\"mpunct\">,<\/span><span class=\"mord\">000<\/span><\/span><\/span><\/span><\/span><\/p>\n<p>In this example, Company ABC&#8217;s gross profit for the quarter is $400,000. This means that, after accounting for the direct costs associated with producing or purchasing the clothing items sold, the company has $400,000 remaining to cover other operating expenses.<\/p>\n","protected":false},"author":1,"template":"","class_list":["post-28585","business-glossary","type-business-glossary","status-publish","hentry"],"acf":[],"featured_image_urls_v2":{"full":"","thumbnail":"","medium":"","medium_large":"","large":"","1536x1536":"","2048x2048":"","image_blog":"","image_podcast":"","image_banking":"","image_blog_internal":"","image_blog_medium":"","image_single_banking":""},"post_excerpt_stackable_v2":"<p>Definition Gross profit is a financial metric that represents the revenue a company earns from its core operations minus the direct costs associated with producing or providing the goods or services sold.\u00a0 What is gross profit? This metric provides a measure of the profitability of a company&#8217;s primary business activities before accounting for indirect expenses such as operating costs, interest, and taxes. Gross profit is calculated using the following formula: Gross profit = revenue &#8211; cost of goods sold (COGS) The gross profit can also be expressed as a percentage, known as gross profit margin. It is calculated using the&hellip;<\/p>\n","category_list_v2":"","author_info_v2":{"name":"root","url":"https:\/\/swoopfunding.com\/ca\/author\/root\/"},"comments_num_v2":"0 comments","_links":{"self":[{"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/business-glossary\/28585","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/business-glossary"}],"about":[{"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/types\/business-glossary"}],"author":[{"embeddable":true,"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/users\/1"}],"version-history":[{"count":2,"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/business-glossary\/28585\/revisions"}],"predecessor-version":[{"id":37822,"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/business-glossary\/28585\/revisions\/37822"}],"wp:attachment":[{"href":"https:\/\/swoopfunding.com\/ca\/wp-json\/wp\/v2\/media?parent=28585"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}