What Is Gross Margin?
Gross margin shows how much of each rupee of sales is left after the direct cost of making or buying what you sold.
Read guide →Gross Profit vs Net Profit
Gross profit is revenue minus the direct cost of goods sold. Net profit goes further and also subtracts operating expenses, interest and tax.
Gross profit shows how well you make or buy and sell your product. Net profit shows what the owners are left with at the end.
Formula
Gross Profit = Revenue − COGS; Net Profit = Gross Profit − Operating Expenses − Interest − Tax
Example
Revenue ₹10,00,000, COGS ₹5,00,000, expenses ₹2,00,000, interest ₹20,000 and tax ₹60,000: gross profit ₹5,00,000 and net profit ₹2,20,000.
Try it yourself
Use the free Net Profit Calculator to work out your own numbers.
Open Net Profit CalculatorFrequently asked questions
Why is net profit lower than gross profit?
Because more costs are deducted, such as salaries, rent, interest and tax.
Which one should I track?
Track both. Gross profit points to pricing and product costs, and net profit shows the overall result.
More guides
What Is EBITDA?
EBITDA measures operating earnings before interest, tax, depreciation and amortization.
Read guide →Revenue vs Profit
Revenue is the money you bring in. Profit is what you keep after costs.
Read guide →BizCalc provides calculators and educational information for general informational purposes only. Results are estimates and should not be considered financial, tax, accounting or investment advice.