Gross Profit
Definition
The dollars left from sales after subtracting the cost of the products you sold. Gross margin is the same figure expressed as a percentage.
Want a deeper explanation?
Formula
Gross Profit = Net Sales − COGSGross profit pays for everything else: marketing, fulfillment, people and profit. Percentages help compare, but dollars are what pay the bills.
It is only accurate if COGS includes full landed cost and inventory is counted correctly. Watch for: gross profit that jumps after a big inventory adjustment, which signals earlier months were wrong.
Example
$800,000 of net sales and $460,000 of COGS gives $340,000 of gross profit, a 42.5% gross margin.