Gross Profit vs Net Profit
Gross profit shows what is left after direct production costs, while net profit shows what is left after every expense in the business, including overhead, taxes, and interest. A business can have healthy gross profit and still lose money at the net level.
Gross Profit
The money a business makes after subtracting the direct costs of producing its products or services. It represents residual earnings after COGS, available to cover all operating expenses.
Net Profit
The actual profit of a business after all operating expenses, interest, taxes, and direct costs are subtracted from total revenue. It deducts COGS, interest, depreciation, and taxes.
Cost of goods sold (COGS) only
COGS plus all operating expenses, interest, and taxes
Near the top of the P&L
The bottom line of the P&L
Efficiency of production or delivery
Overall profitability of the whole business
| What it subtracts | Cost of goods sold (COGS) only | COGS plus all operating expenses, interest, and taxes |
|---|---|---|
| Where it appears | Near the top of the P&L | The bottom line of the P&L |
| What it reveals | Efficiency of production or delivery | Overall profitability of the whole business |