Gross Profit

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Gross Profit

Meaning:

Gross Profit is defined as the profit a business earns after subtracting only the cost of producing or purchasing goods, reflecting how efficiently a company is making and selling its products.

Formula: Gross Profit = Sales – Cost of Goods Sold (COGS).

Example:

For example, if a bakery sells cakes for ₹10,000 and the cost to produce those cakes is ₹6,000, the gross profit would be ₹4,000.

How to understand Gross Profit :

Gross profit indicates the core performance of a business and how much it earns from its main products or services.

It is important for understanding pricing strength and controlling costs.

Uses of Gross Profit:

Businesses use gross profit to set selling prices, check profitability trends, and evaluate production efficiency.

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Gross Profit