What is Gross Profit?
Gross profit is sales minus the cost of the goods sold, before rent, salaries, bills and other expenses are taken off.
Updated
Meaning
English
Gross profit is sales minus the cost of the goods sold, before rent, salaries, bills and other expenses are taken off.
Roman Urdu
Gross profit sale minus bikne wale saman ki cost hai, kiraya, tankhwah aur bills nikalne se pehle.
Also called GP, gross income, trading profit.
Example
A bakery's sales for the week are 410,000 rupees and the ingredients and packing in what it sold cost 250,000. Gross profit is 160,000 rupees, which must still pay staff, gas and rent.
How it works
Gross profit shows whether the buying and pricing work. If gross profit is too thin, no amount of cost cutting on expenses will make the shop healthy. It is the right figure for comparing products, categories, suppliers and staff, because expenses are not split between them.
Watch three things that reduce it without anyone noticing: discounts given at the counter, returns, and cost increases that were never passed on to selling prices. Comparing gross profit with the same period last month or last year shows whether the business is improving or just selling more.
In Nafaa
The Nafaa profit report shows what each product, variant, category, brand, supplier, staff member and day earned in a period after discounts and returns, compares it with the previous period, and lists loss-making items.
Related terms
- Net Profit
Net profit is what is left from sales after the cost of goods and all business expenses have been taken off.
- COGS (Cost of Goods Sold)
Cost of goods sold is the purchase cost of the items a business actually sold in a period, which is subtracted from sales to find gross profit.
- Gross Margin
Gross margin is gross profit shown as a percentage of the selling price: (selling price minus cost) divided by selling price.