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In accounting, gross profit or sales profit is the difference between revenue and the cost of making a product or providing a service, before deducting overhead, payroll, taxation, and interest payments. Note that this is different from operating profit (earnings before interest and taxes).

Net sales are calculated:

Net sales = Sales – Sales returns and allowances.

Gross profit is found by deducting the cost of goods sold:

Gross profit = Net sales – Cost of goods sold.

Gross profit should not be confused with net income:

Net income = Gross profit – Total operating expenses.

Cost of goods sold is calculated differently for merchandising business than for a manufacturer.

[edit] See also

• EBITDA
• Profit margin, the ratio of net income to net sales

[edit] External links