What gross profit and gross margin remain after cost of goods sold?

Gross profit subtracts cost of goods sold from revenue before operating expenses. Gross margin expresses that same gross profit as a percentage of revenue.

Stopping the income statement at gross profit

Revenue minus cost of goods sold gives gross profit. Dividing gross profit by revenue expresses gross margin, while cost ratio shows the share of revenue consumed by COGS.

Markup uses COGS as its base, which is why it differs from margin. Operating expenses, tax and financing costs are outside this gross-profit calculation.

Revenue less cost of goods sold

Gross profit = Revenue − Cost of goods soldGross margin = (Gross profit ÷ Revenue) × 100

One period’s gross spread and margin

The default values use one revenue total and one cost-of-goods total. The output separates the currency spread from the percentage margin.

Gross profit$18,000.00
Gross margin36%
COGS as share of revenue64%
Markup on cost56.25%

Money available versus percentage efficiency

Gross profit indicates the money available to cover operating expenses and profit; gross margin makes businesses or periods of different sizes easier to compare.

Keeping cost classifications consistent

Payroll, rent and marketing may be operating expenses rather than cost of goods sold. Mixing classifications can make gross margin incomparable across periods.

  • Revenue and cost of goods sold cover the same reporting period.
  • The user applies a consistent cost classification.
  • Operating expenses, tax and financing costs are excluded.

Calculations related to gross profit

The following tools examine neighbouring parts of the same calculation without changing the inputs or assumptions used above.

Quick answers

Frequently asked questions

Is gross profit the same as net profit?

No. Gross profit deducts cost of goods sold only; net profit normally includes additional operating and other expenses.

Why are gross margin and markup different?

Gross margin divides profit by revenue, while markup divides profit by cost.

What happens when cost of goods sold is zero?

Gross profit equals revenue, while a markup percentage cannot be meaningfully calculated from a zero cost base.

Educational content only. This guide is not financial advice.