Glossary

Gross profit is the revenue a company generates from its sales minus the direct costs associated with producing or delivering the goods or services.

Direct costs, or cost of goods sold (COGS), include raw materials, labour, and other expenses directly tied to the production process. Gross profit helps assess a company's efficiency in generating income from its core operations. 💰📊

For example, if a company sells $10,000 worth of products and spends $4,000 on direct production costs, its gross profit is $6,000 ($10,000 - $4,000).

Fun fact: Gross profit margin, expressed as a percentage, is the gross profit divided by total revenue. This metric is used to compare profitability across companies and industries, as it measures how efficiently a company turns revenue into profit. 🔍