In accounting, gross profit or sales profit is the difference
between revenue and the cost of making a product or providing a
service, before deducting overhead, payroll, taxation, and
interest payments. Note that this is different from operating
profit (earnings before interest and taxes). The various
deductions (and their corresponding metrics) leading from Net
sales to Net income are as follow: - Net sales = Gross sales -
(Customer Discounts, Returns, Allowances) - Gross profit = Net
sales - Cost of goods sold - Operating Profit = Gross Profit -
Total operating expenses - Net income (or Net profit) =
Operating Profit – taxes – interest (Note: cost of goods sold is
calculated differently for a merchandising business than for a
manufacturer.) See also