Gross and Net Profit

• Profit = total revenue - total costs
• A business may improve profit by increasing sales and reducing costs

  • sales could be increased via increasing advertising
  • variable costs could be reduced by negotiating better deals with its suppliers
  • fixed costs could be reduced by cutting staff
• Gross Profit - profit a business makes after deducting the costs of the product only

  • Gross Profit = sales revenue - cost of sales
• Net Profit - amount of profit left over after all other costs have been taken away from the gross profit

  • Net Profit = gross profit - operating costs and interest