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 (COGS)—the raw materials, labor, and manufacturing expenses needed to create what they're selling. 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 rent or marketing. For example, if a clothing retailer brings in $1 million in sales but spent $400,000 on fabric and factory costs, their gross profit is $600,000. A healthy gross profit margin (gross profit divided by revenue) suggests the company has pricing power and operational efficiency.