The profit a company makes after deducting the cost of goods sold (COGS) from its revenue, before accounting for operating expenses.
Gross profit measures the efficiency of production and pricing. A high gross profit margin means the company retains more from each rupee of sales to cover operating expenses and generate net profit. Gross profit margin varies significantly by industry — software companies may have 80%+ margins while grocery stores operate on 2–5%.
A clothing store has monthly sales of ₹5,00,000 and COGS of ₹3,00,000. Gross Profit = ₹5,00,000 − ₹3,00,000 = ₹2,00,000 (40% gross margin).
Ensures accurate financial reporting and record-keeping
Helps maintain regulatory and tax compliance
Enables better-informed business decisions
Improves operational efficiency and cash flow management
It varies by industry. Software/SaaS: 70–90%. Manufacturing: 25–35%. Retail: 25–50%. Food service: 60–70%. Compare against your industry benchmark.
Gross profit deducts only COGS from revenue. Net profit deducts ALL expenses (COGS + operating expenses + taxes + interest). Net profit is the 'bottom line'.
The direct costs attributable to the production or purchase of goods sold by a company during a specific period.
The total profit of a business after deducting all expenses, taxes, and costs from total revenue. Also called the bottom line or net income.
A financial statement that summarizes a company's revenues, costs, and expenses over a specific period to show net profit or loss.
The percentage of revenue that exceeds the cost of goods sold, showing how much of each rupee in sales is retained as gross profit.
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