Investing for Beginners

  1. Home
  2. Business & Finance
  3. Investing for Beginners
Gross Profit
Investing Lesson 4 - Analyzing an Income Statement
 More of this Feature

• Introduction
• Income Statement
• Revenue / sales
• Cost of Goods Sold
• Gross profit
• Gross margin
• The first three lines
• Operating Expenses
• R&D Expense
• SG&A Expense
• Goodwill Charges
• Extraordinary Events
• Accounting for extraordinary events
• Oper. income/margin
• Interest income and expense
• Interest coverage ratio
• Depreciation expense
• Accum. Depreciation
• Straight-line Method
• Accelerated and Sum of the Years' Digits Method
• Dbl Declining Balance
• Comparing Depr. Mths
• EBITDA
• Income taxes
• Minority Interests - cost, equity, and consolidated methods
• Unreported earnings
• Continuing operations
• Accounting changes
• Preferred dividends
• Net income applicable to common shares
• Net profit margin
• Basic vs. Diluted EPS
• Hiding share dilution
• Share repurchases
• Return on Equity- ROE
• Asset turnover
• Return on Assets- ROA
• Projecting earnings
• Formulas & Calculations
• Putting it together

• Segment 2

 Related Resources
• Investing Lesson 1
• Investing Lesson 2
• Investing Lesson 3
• More Lessons
 From Other Guides
•  Calculating Gross Profit
• Extraordinary Items on the Income Statement 
 Elsewhere on the Web
• Gross Profit Margin Calculator
• Gross Profit Calculator

Gross Profit
The gross profit is the total revenue subtracted by the cost of generating that revenue. It tells you how much money a business would have made if it didn’t pay any other expenses such as salary, income taxes, etc.  Gross Profit should be broken out and clearly labeled on the income statement. Here’s the formula to calculate it yourself:

Total Revenue - Cost of Goods Sold (COGS) = Gross Profit

The gross profit figure is important because it is used to calculate something called gross margin, which we will discuss in a moment.

Next page > Calculating Gross Margin> Page 1, 2, 3, 4, 5, 6, 7, more >>

Join the Money Newsletter for even more great articles and lessons!

Explore Investing for Beginners

About.com Special Features

Investing for Beginners

  1. Home
  2. Business & Finance
  3. Investing for Beginners

©2009 About.com, a part of The New York Times Company.

All rights reserved.