Gross Profit
Definition
Gross profit is revenue minus cost of goods sold. It shows how much the business earns from selling products before operating expenses like rent and payroll.
Example
A business sells $10,000 of products. The cost of goods sold is $6,000. Gross profit is $10,000 − $6,000 = $4,000.
Why It Matters
Gross profit shows whether the business is selling products at a profit before other costs are considered. A declining gross profit can signal pricing or cost problems.