What is the difference in gross profit and net profit?

Answer 1

GROSS PROFIT Gross Profit is the difference between Net Sales and Cost of Goods Sold. First, Net Sales is calculated by subtracting Sales returns and allowances from Sales. Sales - Sales Returns and Allowances = Net Sales Next, Gross Profit is calculated by subtracting Cost of Goods Sold from Net Sales. Net Sales - Cost of Goods Sold = Gross Profit Gross Profit is expressed as a dollar figure, like $100. If Cost of Goods Sold exceeds Net Sales, Gross Profit figure will be negative. PROFIT MARGIN Profit Margin is not a dollar figure. Profit Margin shows the percentage of each sales dollar that results in net income. First, Net Income is calculated by subtracting Operating Expenses from Gross Profit. Gross Profit - Operating Expenses = Net Income Next, the Profit Margin ratio is constructed, and the result is expressed as percentage. Net Income : Net Sales = Profit Margin For example, assume that Net Income equals $10,000 on Net Sales of $100,000. In this case Profit Margin equals $10,000 : $100,000 = 0.10 = 10%. GROSS PROFIT MARGIN Terms "Gross margin" and "Gross profit margin" have been invented by some enterprising accounting students. These terms are part of accounting jargon in some colleges. The meaning of those terms is very liberal, - it means whatever one wants it to mean. For example, "Gross Profit" may mean either Gross Profit or Profit Margin. Most likely, it means that the speaker does not know the meaning of either one of the terms. But "Gross Profit Margin" surely takes the cake. It's just a mouthful piece.

Answer 2

Gross profit is what a company claims after Cost of Goods sold are deducted.

Gross Sales is what a company sales, Net Sales is what a company has after any returns and allowances are deducted (net sales = Gross sales - Returns & Allowances), Gross Profit is the amount after Cost of Goods Sold are deducted (Gross Profit = Net Sales - Cost of Goods Sold), Net Profit is what is retained after expenses are paid (Net Profit = Gross Profit - Total Operating Expenses)

The next step is to find Retained Earnings, which is the final step and the amount shown on the Statement of Retained Earnings and Balance Sheet. Retained Earnings = Net Profit - Dividends Paid to Stockholders. If there are no Dividends to be paid then Net Profit is the same as Retained Earnings.

Although most companies now use the terms Gross Income or Revenue, Net Income (Revenue) etc, as the term Profit, immediately implies that the company has made a profit, it is possible that a companies retained earnings be in the negative balance thus resulting in a Net Loss not "profit".

Answer 3

Not necessarily.

There are three types of profit margins that are commonly used (they can be calculated off the Income Statement)

1. Gross Margin: Subtracting the Cost of Revenue out of the Total Revenue gives us Gross Profit. Gross Profit Margin =Gross Profit/Total Revenue.
2. Operating Margin: Gross Profit less Operating Expenses gives us Operating Profit. Operating Profit Margin = Operating Profit/Total Revenue.

3. Net Margin: Income before tax less Income Taxes Paid gives us Net Income. This is often called the "bottom line" of the company and is one of the primary indicators of a company's performance. Net Margin = Income/Total Revenue.

Typically though, when people talk about profit margin, they usually mean net margin. But it's always wise to double check.

Answer 4

Gross Profit Margin

The gross profit margin is a measurement of a company's manufacturing and distribution efficiency during the production process. The gross profit tells an investor the percentage of revenue / sales left after subtracting the cost of goods sold. A company that boasts a higher gross profit margin than its competitors and industry is more efficient. Investors tend to pay more for businesses that have higher efficiency ratings than their competitors, as these businesses should be able to make a decent profit as long as overhead costs are controlled (overhead refers to rent, utilities, etc.)

To calculate gross profit margin, use this formula: Gross Profit ÷ Total Revenue

Net Profit Margin

The profit margin tells you how much profit a company makes for every $1 it generates in revenue or sales. Profit margins vary by industry, but all else being equal, the higher a company's profit margin compared to its competitors, the better.

Just like the gross profit margins, the net profit margins also vary from business to business and from industry to industry. When we compare the gross and the net profit margins we can gain a good impression of their non-production and non-direct costs such as administration, marketing and finance costs.

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Answer 5

What is the difference between delivered gross, gross profit and selling gross?

Answer 6

EBITDA also accounts for depreciation and amortization

EBITDA: earnings before interest, taxes, depreciation and amortization

Answer 7

Gross profit: Net sales minus cost of goods and services sold. Net profit: Total revenue minus all expenses.

Answer 8

Gross profit is sales less cost of sales

Net profit is gross profit less expense (operating)