Investing term

What is Gross profit?

Revenue minus COGS — what's left after the direct cost of producing the product.

Gross profit is revenue minus the cost of goods sold — what's left after the direct cost of making the product, before any other expenses. It's the first profit line on the income statement and the raw material from which a company pays for everything else: marketing, research, overhead, interest, and taxes. Without healthy gross profit, nothing downstream works.

For example

A company with $10M in sales and $6M in direct production costs has $4M of gross profit to cover all its other expenses.

Gross profit is taught hands-on in Stage 14 — Reading Financial Statements.

See the lesson →

Related terms

Accounts receivable (A/R)Money customers owe the company for goods or services already delivered but not yet paid.AccrualsAccounting entries that record revenue or expense before cash actually moves.Annual reportThe yearly disclosure that includes audited financials, MD&A, and footnotes — the primary source for serious investors.Balance sheetThe 'photo' statement — what the company owns, what it owes, and what's left for owners, on a single date.
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