Gross profit might suggest strong performance, but companies must also consider “below the line” costs when analyzing profitability. It can be limiting since it only takes into account the profitability from COGS and not additional relevant data, such as rising material costs or labor shortages. For example, a low gross profit in a service company with minimal cost of goods sold might not necessarily indicate poor performance. You’ll need to know your total revenue and cost of goods sold before determining your gross profit. Through a series of example sentences with the word “gross,” we will illustrate its flexibility and diverse applications in everyday language.

• Gross profit will consider variable costs, which fluctuate compared to production output.
• Through these examples, it becomes evident that “gross” can convey a range of meanings depending on the context in which it is employed.
• Gross profit is the income remaining after production costs have been subtracted from revenue.
• The $100,000 in revenues would subtract $75,000 in cost of goods sold, giving the company a total of $25,000 in gross profit.
• These statements display gross profits as a separate line item; however, this information is only available for public companies.

How To Use Gross In a Sentence? Easy Examples

• Net income assesses whether the operation is profitable when administrative costs, rent, insurance, and taxes are included.
• A key measure of efficiency, gross profit measures the profit a business makes after subtracting the cost of goods sold (COGS) from the total revenue.
• In conclusion, examples of sentences made with the word “gross profit” illustrate how this financial metric is used to assess a company’s profitability.
• In everyday scenarios, the term does not always equate to financial gain or money.
• The gross profit formula helps you identify cost-saving opportunities on a per-product basis.

If a product or service generates a gross profit, this opens the doorway to the business offering it. However, to maximise gross profit, a company gross profit in a sentence should focus on the products which offer the highest gross profit, rather than selling anything which would generate a positive figure. You can even compare your firm’s gross profit to other companies in your industry to stay ahead of the curve. Take a proactive approach to your profitability with QuickBooks Online. A company’s gross profit is not just for reflecting on the profitability of a company—you can also use it to increase profits.

Gross Profit vs. Gross Profit Margin

It helps demonstrate a company’s overall profitability and reflects the effectiveness of a company’s management. Gross profit provides a clear picture of a company’s profitability from its products or services. Since gross profit only encompasses profit as a percentage of sales revenue, it’s the perfect factor when comparing companies. For example, analyzing gross profit can help identify areas for cost control, such as negotiating better deals with suppliers or optimizing production processes.

Gross-profit Sentence Examples

• In essence, the examples of sentences involving gross profit underline its significance in evaluating a company’s financial performance and long-term sustainability.
• Cost of goods sold is the allocation of expenses required to produce the good or service for sale.
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• The difference between gross profit and gross margin has everything to do with how profits and margins are expressed.
• Sally’s business manufactures hiking boots, and her firm just completed its first year of operations.

Gross profit measures a business’s profit after deducting COGS, whereas operating profit measures a business’s profit after deducting all operating expenses. Gross profit is the amount of money a business makes after deducting the cost of goods sold from the total revenue. The word usage examples above have been gathered from various sources to reflect current and historical usage.

profit margin

In conclusion, examples of sentences made with the word “gross profit” illustrate how this financial metric is used to assess a company’s profitability. The gross profit represents the difference between revenue and the cost of goods sold, providing insights into a business’s efficiency in generating profits from its core operations. Companies often analyze gross profit to make strategic decisions, set pricing strategies, and evaluate performance over time. A key measure of efficiency, gross profit measures the profit a business makes after subtracting the cost of goods sold (COGS) from the total revenue.

• The production issues announced this week could get in the way of Rivian’s goal of achieving positive gross profits by the fourth quarter of this year.
• Gross profit equals a company’s revenues minus its cost of goods sold (COGS).
• A portion of fixed costs is assigned to each unit of production under absorption costing, which is required for external reporting under generally accepted accounting principles (GAAP).
• Generally speaking, a good gross profit margin is 20% or higher.
• Gross profit is dictated by net revenue and cost of goods sold, so a company can strategically adjust more elements of gross profit than it can for net profit.
• Enjoy instant translations, clear definitions, and synonyms to boost your vocabulary.

Learn To Use Gross Profit In A Sentence With These Examples

This is different from gross profit which calculates how much a business profits after the cost of goods is deducted from the normal balance revenue. Gross revenue is also called gross sales or gross income, all of which are one and the same. The production issues announced this week could get in the way of Rivian’s goal of achieving positive gross profits by the fourth quarter of this year. Enjoy instant translations, clear definitions, and synonyms to boost your vocabulary. Investors also will get a portion of net profits, and Pressman said the company will not take any money from a film’s net profits until investors are paid back with interest.

Removing the “noise” of administrative or operating costs allows a company to think strategically about product performance and to implement cost control strategies more effectively. Generally speaking, a good gross profit margin is 20% or higher. That would mean for every $1 of revenue the business gets $0.20 as gross profit. According to a recent New York University report, the average profit margin is Financial Forecasting For Startups 7.71% across different industries.

Examples of Different Contexts

Cost of goods sold is the allocation of expenses required to produce the good or service for sale. Gross profit is a useful high-level gauge, but companies must often dig deeper to understand underperformance. A company should investigate all revenue streams and each component of COGS to identify the cause if its gross profit is 25% less than its competitor’s. A portion of fixed costs is assigned to each unit of production under absorption costing, which is required for external reporting under generally accepted accounting principles (GAAP). A $3 cost would be attributed to each widget under absorption costing if a factory produces 10,000 widgets and pays $30,000 in rent for the building.