Profit is the amount of money a business brings in. Comparing current profits with profits from previous accounting periods helps you understand the growth of your business. To create accurate financial statements you should understand what is Gross Profit? Let's find out with Giaiphapdonggoi.net!
Table of Contents [Hide]
1. What is Gross Profit?
What is Gross Profit?
Gross profit in Vietnamese is gross profit which is the profit a company generates after deducting all costs related to the production and sale of the business's products or costs related to the supply. its services. Also called profit from sales or gross income, gross profit appears on a company's income statement and is calculated by subtracting your cost of goods sold (COGS) from your total sales. These figures can be found on a company's income statement.
Gross profit includes only variable costs and does not take into account fixed costs. Gross profit measures how efficiently a company uses labor and materials to produce goods or services.
2. What does Gross Profit tell you?
What does Gross Profit tell you?
Gross profit is a measure of how efficiently an establishment uses labor and materials to produce goods or provide services to customers. It is an important number when examining the profitability and financial performance of a business.
Gross profit helps you understand the costs required to generate revenue. As cost of goods sold (COGS) increases, the value of gross profit decreases, so you have less money to cover your operating expenses. As COGS decreases, profits increase, which means you have more money to spend on your business.
>> See more plastic straps used to fix goods
3. How to calculate Gross Profit
How to calculate Gross Profit
Gross profit is the financial profit of a company after deducting the costs necessary to produce and distribute the company's goods or services. These costs are collectively known as cost of goods sold. The revenue of a company after how much it accounted for must be paid back to the revenue is called the gross profit of the company, which means it is the actual amount earned.
Formula for calculating gross profit:
Gross Profit = Total Revenue – Total Cost of Goods Sold
Inside:
Revenue: This is the amount generated from the sale of a product during a specific period. Amount before any deductions. Cost of goods sold does not include administrative or marketing costs.
Cost of Goods Sold: Cost of Goods Sold (or COGS) is the direct cost involved in producing a product. These include: Depreciation, factory costs, labor, materials, warehouse.
The definition of gross profit only considers variable costs for its deductions. This is any cost that increases or decreases the level of output produced. Fixed costs not directly tied to output such as insurance and rent are not included in gross profit.
Eg:
Assume that a manufacturer has net sales of $60,000 and cost of goods sold (using absorption costs) of $39,000. Thus, the total producer profit is $21,000 ($60,000 minus $39,000). The gross margin or gross profit percentage is 35% (gross profit of $21,000 divided by net sales of $60,000).
Formula to calculate Gross Profit Margin:
Gross profit margin (also known as “gross margin”) is simply gross profit, expressed as a percentage.
Gross profit margin = (Revenue - Cost of goods sold) / Revenue x 100
In the example above, the calculation would be: Gross profit margin = ($60,000 - $39,000) / $60,000 x 100 = 35%
So gross profit margin is 35%. In a nutshell, this is the percentage of revenue left after deducting COGS.
4. Why is Gross Profit important?
Why is Gross Profit important?
Gross profit is important to a company's accounting because it specifically relates to cost of goods sold. In other words, the data generated can reflect how effective a company's management is when it comes to purchasing supplies, allocating labor, or decisions related to factories or production sites. product.
5. What is the difference between net profit and gross profit?
What is the difference between net profit and gross profit?
Gross profit is the income that a business is left with, after paying all the direct costs involved in producing a product. Net profit is what is left after deducting all other expenses, such as overhead, administrative and career expenses. These other costs are called “fixed costs”. Fixed costs are costs that do not change, or change very little, over time. Fixed costs include:
Advertisement
KY
