Gross Profit

Gross Profit is the money a company keeps after paying for the direct costs of making or buying the products it sells. Think of it as revenue (total sales) minus the cost of goods sold—basically what it costs to manufacture or purchase inventory. You'll see this number on a company's income statement, and it matters because it shows how efficiently a business produces its products before accounting for operating expenses like salaries and rent. A healthy gross profit margin (gross profit divided by revenue, shown as a percentage) suggests the company has good pricing power and cost control. For example, if a retailer brings in $1 million in sales but spent $600,000 on inventory, their gross profit is $400,000.