Gross Profit vs Net Profit
Written by True Tamplin, BSc, CEPF®
Updated on March 30, 2021
Definition of Gross profit vs Net Profit
The cost of goods sold is different from operating expenses, which are fixed costs that do not directly depend on the companyÃ¢â‚¬Ëœs output. These include rent, management salaries, marketing, insurance, and others.
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What Is The Difference Between Net Profit And Gross Profit?
After subtracting all expenses, including non-operating expenses like interest and taxes, what is left is net income (also called net profit or earnings).
Here’s how to calculate the three main levels of profit:
- Gross Profit = Revenue – Cost of Goods Sold
- Operating Income = Gross Profit – Operating Expenses
- Net Profit = Operating Income – Other Costs