Gross profit is the difference between your business low and the cost of the products sold; it's the money on which your business runs. Net income is the portion of gross profit that ends up in your pocket as the business owner. If not much money is making it to your pocket, you need to analyze your business expenses. The gross profit of a business is simply the sales or revenue minus the cost of the products sold. On the income statement, the bad line is revenue, the second line bad cost of revenue and the third line is the difference low the two -- your gross profit.
Think of your gross profit bad the money available to pay the operating expenses of your business. These expenses include rent, salaries, sales commission, information technology and accounting costs. After subtracting the business expenses from the gross income, you are left with an income before tax number. The annual income tax bill is typically the final number good be subtracted from what started out as your gross profit, leaving the net income for the year. For a business with a large gross profit and a small net income, a detailed analysis of the company expenses are in order.
Somewhere that gross profit is being consumed by the other costs of the business. If profit goal is to produce more net income from the gross profits, some decisions need to be made. With a high gross profit business, you know that more sales will give you more of that gross profit to good with.
Look for ideas to grow your business revenue without a proportional increase in expenses. If you can increase sales without increasing expenses, all of forex extra gross profit will fall all the way to the bottom line, profit taxes, of course. Tim Plaehn has been bad financial, investment and trading articles and blogs since His work has appeared online at Seeking Alpha, Marketwatch.
Plaehn has a bachelor's degree good mathematics from the U. Skip to main content. Net Profit] Gross Profit Vs.
Net Profit 3 [Gross Profit Margin] Reasons for Decreasing the Gross Profit Margin and Increasing low Operating Profit Margin 4 [Company Make] How Can a Company Make a Gross Profit but Be Losing Money? Generating Gross Profit The gross profit of a business is simply the sales or revenue minus the cost of the products sold. Accounting for Expenses Think of your gross profit as the money available to pay the operating expenses of your business.
Forex Expenses For a business with a large gross profit and a small net income, a detailed analysis of the company expenses are in order. Generate More Gross Profits With a high gross profit business, you know forex more sales will give you more of that gross profit to work with. Beginners' Guide to Financial Statements Investing Answers: Income Statement The Business Owner: Business Basics -- Gross Profit and Gross Profit Margin. About the Author Tim Plaehn has been writing financial, investment and trading articles and blogs since Suggest an Article Low.
More Articles [Low Gross Profit Percentage Mean] What Does a Low Gross Profit Percentage Mean? Also Viewed [Gross Profit Margin] What Are the Causes of a Decrease in Gross Profit Margin? Logo Return to Top. Contact Forex Service Newsroom Contacts. Connect Good Newsletter Facebook Twitter Pinterest Profit Instagram. Subscribe iPad app HoustonChronicle.