gross profit: meaning, definition, pronunciation and examples
C1Formal, Technical (Business/Finance)
Quick answer
What does “gross profit” mean?
A key financial metric calculated as total revenue minus the cost of goods sold (COGS), representing the profit a company makes after direct production costs but before operating expenses, interest, and taxes are deducted.
Audio
Pronunciation
Definition
Meaning and Definition
A key financial metric calculated as total revenue minus the cost of goods sold (COGS), representing the profit a company makes after direct production costs but before operating expenses, interest, and taxes are deducted.
The figure serves as a fundamental indicator of a business's production efficiency and pricing strategy, and is the starting point for calculating net profit. In broader contexts, it can refer to the initial, unrefined gain from an activity before necessary deductions.
Dialectal Variation
British vs American Usage
Differences
Terminology is identical. Minor spelling differences may appear in related documents (e.g., 'analyse gross profit' vs. 'analyze gross profit').
Connotations
Identical technical and financial connotations in both regions.
Frequency
Equally high frequency in business contexts in both the UK and US.
Grammar
How to Use “gross profit” in a Sentence
The company [verb] a gross profit of [amount].Gross profit [verb] by [percentage/amount].To calculate gross profit, [subtract COGS from revenue].Vocabulary
Collocations
Examples
Examples of “gross profit” in a Sentence
verb
British English
- The business aims to gross profit £2m this year.
- They failed to gross profit from the new line.
American English
- The company is projected to gross profit $5m this quarter.
- The venture did not gross profit as expected.
adverb
British English
- [No standard adverbial use]
- [No standard adverbial use]
American English
- [No standard adverbial use]
- [No standard adverbial use]
adjective
British English
- The gross-profit figure is encouraging.
- We need a gross-profit analysis.
American English
- The gross-profit margin is under pressure.
- She reviewed the gross-profit statement.
Usage
Meaning in Context
Business
Essential term in financial reporting, investor presentations, and management discussions. E.g., 'Our gross profit improved due to better supplier contracts.'
Academic
Used in economics, business, and accounting courses and literature to analyse firm performance.
Everyday
Rare outside of personal investing, running a small business, or discussing company news.
Technical
A defined line item on an income statement (P&L), subject to specific accounting standards (GAAP/IFRS).
Vocabulary
Synonyms of “gross profit”
Strong
Neutral
Weak
Vocabulary
Antonyms of “gross profit”
Watch out
Common Mistakes When Using “gross profit”
- Using 'gross profit' to mean net profit or overall earnings. Saying 'gross profits' as a plural (usually treated as a singular mass noun). Confusing it with 'revenue' or 'turnover.'
FAQ
Frequently Asked Questions
No. Revenue (or turnover) is the total income from sales. Gross profit is revenue minus the direct costs of producing the goods sold (Cost of Goods Sold).
Gross profit is revenue minus cost of goods sold. Net profit is gross profit minus ALL other expenses (operating costs, taxes, interest, etc.). Net profit is the 'bottom line.'
Yes. If operating expenses (like marketing, salaries, rent) are very high, they can exceed the gross profit, leading to a net loss.
Gross profit margin (gross profit/revenue) shows the percentage of revenue retained as profit after direct costs. It's a key indicator of production efficiency and pricing power, allowing comparison between companies of different sizes.
A key financial metric calculated as total revenue minus the cost of goods sold (COGS), representing the profit a company makes after direct production costs but before operating expenses, interest, and taxes are deducted.
Gross profit is usually formal, technical (business/finance) in register.
Gross profit: in British English it is pronounced /ˌɡrəʊs ˈprɒfɪt/, and in American English it is pronounced /ˌɡroʊs ˈprɑːfɪt/. Tap the audio buttons above to hear it.
Phrases
Idioms & Phrases
- “[Not idiomatic; a fixed technical term]”
Learning
Memory Aids
Mnemonic
Think of a fisherman's 'gross' (total) catch. After he deducts the 'cost' of bait and fuel (COGS), the remaining fish are his 'gross profit.' He still needs to pay for the boat rental and crew (operating expenses) to find his 'net' profit.
Conceptual Metaphor
PROFIT IS A LAYERED CAKE: Gross profit is the first, thickest layer (revenue minus direct costs). Subsequent layers (operating expenses, tax) are sliced away to reveal the final, smaller net profit layer.
Practice
Quiz
Which expense is NOT deducted when calculating gross profit?