In business accounting, the amount by which sales revenue exceeds the cost of goods sold is called gross profit.
Gross profit measures the money left after directly attributable production or purchasing costs are removed from revenue. For a retailer, those costs commonly include the purchase price of merchandise; for a manufacturer, they can include materials and direct production labor. The basic formula is revenue minus cost of goods sold.
Gross profit is not the same as net profit. Operating expenses such as rent, marketing, administration, interest, and taxes are generally deducted later. Gross margin expresses gross profit as a percentage of revenue, allowing comparisons between businesses of different sizes.
Analysts often track gross profit because it shows pricing power, purchasing efficiency, and production economics. However, industries classify some costs differently, so comparisons should use consistent accounting policies.