# How To Calculate Gross Profit

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## How To Calculate Gross Profit

How To Calculate Gross Profit: When starting a business, one of the things you must know how to do is find out how much money you have actually made. The term is explained and how to find it in an easy-to-understand manner.

Hi, my name is Grant Hobson. I've been a finance analyst for the last six years. Today I'm going to run you through some financial performance methods as well as some investment appraisal techniques.

How to calculate gross profit. Gross profit is simply a company's revenue minus cost of goods sold. It's the residual profit after selling a product or service and deducting all the costs associated with its production and sale.

Gross profit is very important because it indicates how efficiently a management has used labor and the supplies in the production process. And then it's used to calculate the gross profit margin. For example, if we look at the company here.

They've generated a revenue of 2,000 pounds in the year. The cost of sales associated with this was 1,500 pounds. The gross profit was therefore 2,000 minus your 1,500 to give you 500 pounds gross profit.

So to recount, gross profit is simply a company's revenue minus cost of goods sold.