KPI Library – Gross Profit

Gross Profit

Description:

Gross profit is the result of deducting the direct costs associated with the sale of goods and services from the revenue, however it does not include deductions for general overhead costs such as payroll, taxation, and interest payments etc.

 

Calculation:

Revenue minus direct costs of the production of good and services = Gross Profit (£).

 

Example:

Identify the revenue derived from the total sales in a given year (10,000 items x £10 = £100,000).

Identify the total direct cost associated with sales in a given year = £30,000.

Subtract total direct cost associated with sales (£30,000) from total revenue (£100,000) = £70,000 gross profit.