What is gross profit?
A company's gross profit is the total sales income after the costs of producing the goods or services sold have been deducted. It's reported as a numerical figure. Gross margin shows this figure as a percentage of the sales revenue. It's called gross because other costs (such as overheads and tax) have not yet been deducted.
Where have you heard about gross profit?
Gross profit is a familiar term in business, and of great importance to every company and investor as an indicator of performance and potential.
What you need to know about gross profit...
A company's gross profit is usually reported quarterly, and certainly annually. It's a way to see exactly how much money it's making, when the direct costs of production are taken into account.
But it has to be looked at alongside gross margin, to understand whether the profit figure represents an efficient management of costs. The margin may be declining, even if the gross profit figure is higher meaning costs as a proportion of income have gone up.
Together these two bits of data can give a good indicator of the company's performance in the context of its industry, the market and its own forecasts and expectations. It's one of the figures reported by companies that will impact on share price.