Gross profit is the money your business has left from its sales once you subtract the direct costs of producing those goods or services. Those direct costs are usually called cost of goods sold or cost of sales.
Why it matters
Gross profit shows whether your core product or service makes money before overheads like rent, salaries and marketing are taken into account. A healthy gross profit gives you room to cover those running costs and still come out ahead.
Gross profit versus net profit
Gross profit only deducts direct costs. Net profit goes further and deducts every other expense, including overheads, interest and tax. Both numbers tell you something useful about the business.
- Strong gross profit, weak net profit can point to high overheads.
- Weak gross profit can point to pricing or supplier cost problems.
When you apply for a Credicorp Flex or Slice facility, we look at the wider picture of your companys trading, not a single figure in isolation.
See also: What is net profit?, Direct lender vs broker: which should you use? and Funding an urgent equipment repair or replacement.