2 min read
Definition
Gross profit is revenue less the cost of goods sold — the direct costs of producing what you sold. Expressed as a percentage of revenue it is your gross margin.
In plain terms
It is the pool of money left after making the product, available to pay rent, wages and everything else. A thin gross margin leaves little room for anything to go wrong.
Why it matters for your company
Gross margin trends reveal pricing power and cost control long before net profit does. Check yours with the gross margin calculator, and read how to improve gross margin.
Related reading
Cost of goods sold (COGS)
Cost of goods sold (COGS) is the direct cost of the products or services you sold in a period — materials,…
Read →Gross margin
Gross margin is gross profit as a percentage of revenue — how much of each pound of sales remains after the…
Read →
Operating profit
The profit a business makes from its core trading after operating costs but before interest and tax — a key…
Read →
Contribution margin
Contribution margin is what each sale contributes towards fixed costs and profit once its variable costs are…
Read →Funding for UK limited companies
Credicorp lends to your company, not to you personally — short-term working capital with no personal guarantee. See what your business could access.