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Gross
Profit |
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Investing Lesson 4 - Analyzing an Income Statement |
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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
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