Gross profit

1) A company's total sales revenue minus its cost of goods sold.

Also known as "gross profit".

2) A company's total sales revenue minus cost of goods sold, divided by the total sales revenue, expressed as a percentage.

3) In the case of an adjustable-rate mortgage, the interest rate (expressed as a percentage) that is added on to the base index rate in order to establish the actual interest rate the borrower will pay on the loan.

Investopedia Says:
1) This dollar amount represents the amount of money the company generated over the cost of producing its goods or services. This amount can then be used to pay fixed expenses such as leasehold payments and administrative expenses.

2) This number represents the proportion of each dollar of revenue that the company banks as gross profit. For example, if a company's gross margin for the most recent quarter was 35%, it would retain $0.35 from each dollar of revenue generated, to be put towards paying off general and administrative expenses and ultimately banked as net income.

3) When an adjustable-rate mortgage is constructed for a real estate transaction, a standardized index is used to establish a base interest rate and then additional percentage points are added to the rate based on the risk factors of the loan and the borrower. The rate that results is the actual interest rate the borrower will pay on the loan. Generally, the better an individual's credit rating and the lower the amount of his/her loan, the smaller the loan's gross margin will be, as the lender requires a higher gross margin (its profit margin) for higher risk loans.

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Net sales less the Cost of Goods Sold. Also called gross margin. See also Net Profit.

1. Banking. Synonymous with Spread or yield. The difference between the lender's cost of funds, and the rate paid by the borrower, including upfront fees, usage fees, and cancellation fees.

2. Finance. A disclosure on the Profit and Loss (P&L) statement of the borrower; the difference between sales and gross earnings.

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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.

See also

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

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