What term describes a company's total sales minus the cost of goods sold?

The term for a company’s total sales minus the cost of goods sold is gross profit. The basic formula is gross profit = sales revenue − cost of goods sold, or COGS.

COGS represents the direct costs of making or acquiring the products that were sold during a period. Depending on the business, it can include materials, direct production labor, freight-in, and allocated factory overhead. Costs such as office rent, marketing, and administrative salaries are generally deducted later as operating expenses.

Gross profit appears near the top of an income statement. It shows what remains from sales before operating expenses, interest, and taxes are considered. For example, a company with $1 million in revenue and $600,000 in COGS has $400,000 in gross profit.

Gross profit is often confused with gross margin. Gross profit is an absolute dollar amount; gross margin is that amount divided by net sales and expressed as a percentage. EBITDA, operating income, and net income come later in the profit calculation and subtract additional categories of expense.