Gross Profit

Business, Legal & Accounting Glossary

Definition: Gross Profit

Gross Profit

Quick Summary of Gross Profit

Sales minus cost of sales before deducting administration and selling expenses (see also gross margin).

What is the dictionary definition of Gross Profit?

Dictionary Definition

Gross profit is the profit a company makes after deducting the costs associated with making and selling its products, or the costs associated with providing its services. Gross profit appears on a company’s income statement and is calculated by subtracting the cost of goods sold (COGS) from revenue (sales).

Full Definition of Gross Profit

Gross profit is defined as revenue minus the cost of goods sold (COGS).

<math>Gross\ Profit=Revenue-COGS</math>

Gross profit is expressed in dollars and is the amount of profit a company has left after deducting all expenses directly related to a sale. These expenses include the cost to buy/produce the product/service sold, transportation costs to get it to a store, etc. It does not include corporate overhead, advertising, interest costs, etc.

This is how much money the company makes directly from selling its goods or services. It is the amount of “markup” above the cost of buying or making those products or services. So if you hear “100% markup” then you can quickly calculate the gross profit as half the sale price. (For those who think that one went by too quickly, a 100% markup means that the company is selling the product for twice what it cost it. So out of the total selling price, COGS is half and gross profit is half.)

Remember, out of gross profit, all the other expenses of the company have to be paid. This includes things like lighting and rent and executive salaries. It also includes research and development and other operating expenses, as well as taxes and interest owed on any debt. So, don’t be surprised at the seemingly large number relative to revenue. The company isn’t fleecing its customers (so we hope) but is setting the price high enough and earning enough gross profit to support itself and still have some leftover (net profit).

On the income statement, this is the first (nearest to the top) profit line. As such, it is followed by analysts. Actually, it is probably more accurate to write that it is the gross profit margin which is followed. In the example above where the gross profit is half the sales price, well that’s 50% which is the gross profit margin.

Related Phrases

Cost of goods sold (COGS)
Gross margin

Cite Term

To help you cite our definitions in your bibliography, here is the proper citation layout for the three major formatting styles, with all of the relevant information filled in.

Page URL
Modern Language Association (MLA):
Gross Profit. Payroll & Accounting Heaven Ltd.
April 18, 2024
Chicago Manual of Style (CMS):
Gross Profit. Payroll & Accounting Heaven Ltd. (accessed: April 18, 2024).
American Psychological Association (APA):
Gross Profit. Retrieved April 18, 2024
, from website:

Definition Sources

Definitions for Gross Profit are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 6th August, 2021 | 0 Views.