Gross Profit Vs. Net Profit
Gross Profit is the profit that a company makes after deducting the cost of goods sold (COGS) from its revenue. COGS includes the direct costs of producing or acquiring the goods that a company sells, such as raw materials, labor costs, and manufacturing overheads. Gross Profit is calculated by subtracting COGS from the revenue
Gross Profit = Sale-COGS
Net Profit is the profit that a company makes after deducting all of its expenses, including COGS, operating expenses, interest, taxes, and other charges. Net Profit is calculated by subtracting total expenses from the total revenue.
Net Profit = Sale-Total Expenses –Income Tax
Example :
Sale =100
COGS = 50
Other Expenses = 30
Income Tax = 10
Gross Profit = Sale-COGS
Gross Profit = 100-50 = 50
Net Profit = Sale-Total Expenses-Income Tax
Net Profit = 100-50-30-10 = 10