>>84969287You are half right.
Gross profit and net profit are two important financial metrics used to evaluate a company's profitability:
Gross Profit:
- Gross profit is the difference between revenue and the cost of goods sold (COGS).
- It represents the profit earned from sales before considering other expenses.
- Gross profit is calculated as: Gross Profit = Revenue - COGS
Net Profit:
- Net profit, also known as net income, is the profit earned by a company after considering all expenses, taxes, and other liabilities.
- It represents the company's total earnings or bottom-line profit.
- Net profit is calculated as: Net Profit = Gross Profit - Operating Expenses - Taxes - Other Liabilities
Key differences:
- Gross profit focuses on the profitability of sales, while net profit considers all expenses and liabilities.
- Gross profit is a subset of net profit, as net profit includes gross profit and additional expenses.
Example:
- Revenue: $100,000
- COGS: $60,000
- Gross Profit: $40,000 ($100,000 - $60,000)
- Operating Expenses: $20,000
- Taxes: $5,000
- Net Profit: $15,000 ($40,000 - $20,000 - $5,000)
In this example, the company has a gross profit of $40,000 and a net profit of $15,000.
