What is Gross Profit?
Gross profit definition: gross profit is the amount of money a company earns from sales after the cost of doing business.
Gross profit is calculated once costs including – but not limited to – the following have been deducted:
These costs are typically estimated in the initial pricing of a product or service, but will often be recalculated based on the actual number of sales made.
A simple example would be:
- Nike sells a training t-shirt for $20
- $12 is required to fund the creation and marketing
- Nike earns a gross profit of $8 per shirt