Gross Profit Calculator

What is gross profit?

Gross profit is the difference between your net sales and the cost of goods sold (COGS). This metric is used to measure the total profit your business earns from its core activities. Gross profit is a vital indicator of the financial health, production efficiency and pricing strategies of your business.

Relevant channels: E-commerce, retail, manufacturing, service providers.

How to use this gross profit calculator

To calculate gross profit, enter your net sales and the cost of goods sold (COGS) for a specific period. The tool will instantly calculate your gross profit, providing you with insights into your business's performance.

Gross profit formula

An image showing gross profit formula

Gross Profit=Net Sales−Cost of Goods Sold (COGS)

Understanding the gross profit result

The ideal gross profit depends on various factors such as your industry and business model. Generally, a higher gross profit indicates better financial health and operational efficiency.

A high gross profit indicates that your production process is efficient and that you have a good pricing strategy.
A low gross profit suggests high production costs, low sales prices, or a need to optimize pricing and cost management strategies. If the value is negative, it indicates that your business is running on a loss.

When to calculate gross profit

You must calculate your gross profit in the following key situations:

During monthly, quarterly, or annual financial reviews to evaluate profitability
To assess the impact of cost-saving measures or price adjustments
When planning budgets or financial forecasts
While comparing performance across different periods or product lines
To determine the viability of new products or services

How to calculate Gross profit with example

If your business generated $500,000 in total sales and the cost of goods sold (COGS) was $300,000, your gross profit is:

Gross Profit = Net Sales- Cost of Goods Sold (COGS)

Gross Profit = 500,000−300,000 = 200,000

In this example, your gross profit is $200,000, meaning that your business retained $200,000 after covering the direct costs associated with producing goods or services.