• Gross profit, also called gross income, is calculated by subtracting the cost of goods sold from the revenue.

  • As a rule, gross profit includes only variable costs and does not take into account fixed costs.
  • Gross profit evaluates how efficiently a company uses its labor and materials to produce goods or services.
  • Gross profit, which reflects only the cost of goods sold, differs from net profit, which takes into account all expenses of the company.
  • Derived from gross profit is gross profit, a margin showing what percentage of a company’s income can be used to cover the company’s operating expenses.