Gross profit

Gross profit is your sales (turnover) minus the direct costs of the goods or services you sold, often called cost of sales. It shows how much money is left after paying for stock, materials and direct labour linked to those sales. It does not include overheads such as rent, utilities, admin wages, marketing, interest or tax.

Gross profit is an amount in money, while gross margin is the percentage of gross profit to sales. Do not confuse it with net profit, which subtracts overheads and other costs as well.

What gross profit includes and excludes:

• Includes: sales from customers minus direct costs like purchase cost of stock, production materials and direct labour tied to those sales.
• Excludes: overheads such as rent, utilities, general staff costs, marketing, depreciation, interest and tax.