Gross profit is what's left after the direct cost of making the product.
What it is
Gross profit is revenue minus cost of goods sold. It measures how much money a company keeps from each sale before paying for overhead, marketing, research, interest, and taxes. Expressed as a percentage of revenue it is called gross margin.
Why it matters
Gross profit shows the basic economics of a company's products: high gross margin signals pricing power or low production cost, while thin margins leave little room to cover other expenses. A pitfall is comparing gross margin across industries, since a software firm and a grocer have structurally different cost bases.
How it's calculated
Subtract cost of goods sold from revenue; gross margin divides that result by revenue.
How Quintarthai uses it
Gross profit and gross margin appear in the income statement on the Financials tab and the profitability section of the Ratios tab of each company page.
Cross-border note. Because IFRS and US GAAP define revenue and direct costs similarly, gross profit is generally comparable between Canadian and US companies in the same industry.
FAQ
What is the difference between gross profit and gross margin?
Gross profit is a dollar amount (revenue minus COGS), while gross margin is that same figure expressed as a percentage of revenue.
Is gross profit the same as operating income?
No. Gross profit comes before operating expenses like marketing and administration; operating income subtracts those as well.
Check your understanding
A grocer reports a 25% gross margin and a software firm reports an 80% gross margin. What is the most appropriate conclusion?
Gross margin varies by industry's underlying cost structure, so comparing a grocer to a software firm directly is a pitfall rather than a fair efficiency contest.