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ADNot all profit is the same — and that’s where many businesses get confused.
There are two important types of profit in business:
🔹 Gross Profit
Gross Profit = Revenue – Cost of Goods Sold (COGS)
This shows how much money is left after covering the direct cost of producing or purchasing your product.
Example:
If your revenue is ₹10,00,000 and your product cost is ₹6,00,000,
your gross profit is ₹4,00,000.
But the calculation doesn’t stop there 👇
🔹 Net Profit
Net Profit = Gross Profit – All other expenses
This includes:
• rent
• salaries
• marketing
• software subscriptions
• taxes
• administrative costs
After deducting all expenses, the remaining amount is your actual profit.
A business can show high gross profit but still have low net profit if expenses are not managed properly.
Smart business owners focus on true profitability, not just sales or gross numbers.
📘 A Business Lesson
Follow for simple business concepts explained clearly.
#BusinessBasics #GrossProfit #NetProfit #EntrepreneurMindset #StartupEducation
@advisorankit
