What is gross profit and net profit?
Gross profit represents the excess of your sales or revenue over the cost you incurred to make or manufacture products and services. Your net profit represents all income remaining after all expenses have been deducted.Gross ProfitIf you sell 50 units of a product at price of $12 per unit, your revenue will be $600. Expenses in the amount of $150 to manufacture those units, which is called cost of goods sold, should be subtracted from the revenue. Your gross profit is $450.Net ProfitNet profit represents revenues minus all other expenses including the cost of goods sold. If you have revenue of $5,000 and your total expenses are $4,000, your net profit is $1,000.Profit MarginProfit margin can be calculated by dividing net profit by revenue. If your net profit is $1,000 and your revenue is $5,000, your profit margin is 20 percent. The profit margin can be increased by increasing net profit.Sales/ExpensesTo make a company more profitable, expenses have to be reduced and sales or revenues
