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Business Definition for: gross profit

Dictionary of Accounting Terms
gross profit

sales minus cost of sales; also called gross margin.

Dictionary of Finance and Investment Terms
gross profit

net sales less the cost of goods sold . Also called gross margin.

See also net profit
Dictionary of Business Terms
gross profit

difference between revenue (sales) and the cost of goods sold. For example, XYZ Company sold through a newspaper advertisement 120 belts that cost XYZ $10 each. XYZ sold each belt for $18. The gross profit is calculated as follows:

(sales) 120 × $18 = $2,160
(cost of sales) 120 × $10 = $1,200
Gross profit $ 960

The gross profit as a percentage of revenue is termed the gross profit margin. Gross profit is different from net profit , which is gross profit net of other income or expenses, interest expense, and taxes.

Dictionary of Marketing Terms
gross profit

difference between revenue (sales) and the cost of goods sold. For example, XYZ Company sold through a newspaper advertisement 120 belts that cost XYZ $10 each. XYZ sold each belt for $18. The gross profit is calculated as follows:

120×$18 = $2160
120×$10 = $1200
Gross profit $ 960

The gross profit as a percentage of revenue is termed the gross profit margin. Gross profit is different from net profit , which is gross profit net of other income or expenses, interest expense, and taxes.

See also average profit margin
Related Terms:
net profit
average profit margin

  1. method of calculating the profit margin per item sold by applying an equal proportion of the total expenses of the seller against each item sold. It can be used to determine the benefit to be gained from advertising. For example, assume a $100 advertisement will generate 100 sales. Each items sells for $5 and costs $3 to produce and deliver, leaving a profit margin of $2. Since advertising will cost $1 per item sold, the average profit margin of $1 indicates that the item will be profitable after advertising expense.
  2. gross profit margin of a business enterprise averaged over a period of time. The gross profit margin is the annual net sales or revenues less the cost of goods sold.

Referring Terms:
gross margin
gross-profit ratio
gross margin
gross contribution margin
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