{"id":264308,"date":"2023-07-03T15:29:37","date_gmt":"2023-07-03T03:29:37","guid":{"rendered":"https:\/\/www.reckon.com\/nz\/?page_id=264308"},"modified":"2025-02-06T15:11:36","modified_gmt":"2025-02-06T03:11:36","slug":"gross-profit-vs-net-profit","status":"publish","type":"glo","link":"https:\/\/www.reckon.com\/nz\/glossary\/gross-profit-vs-net-profit\/","title":{"rendered":"Gross profit vs. net profit (Comparison)"},"content":{"rendered":"

[et_pb_section fb_built=”1″ custom_padding_last_edited=”off|desktop” _builder_version=”4.27.2″ custom_margin=”0px||0px||false|false” custom_padding=”0px||0px||false|false” custom_padding_phone=”0px||||false|false” locked=”off” global_colors_info=”{}”][et_pb_row column_structure=”1_3,2_3″ _builder_version=”4.27.2″ background_size=”initial” background_position=”top_left” background_repeat=”repeat” width=”100%” custom_margin=”0px||0px||false|false” custom_padding=”0px||0px||false|false” global_colors_info=”{}”][et_pb_column type=”1_3″ module_class=”table-contents” _builder_version=”4.23″ background_color=”#f4f4f4″ custom_padding=”25px||25px||true|false” sticky_position=”top” sticky_limit_bottom=”section” sticky_position_tablet=”top” sticky_position_phone=”none” sticky_position_last_edited=”on|desktop” pac_dcm_carousel_specific_module_num=”0″ border_radii=”on|24px|24px|24px|24px” global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text _builder_version=”4.23″ text_font=”||||||||” global_colors_info=”{}” background__hover_enabled=”on|desktop”][\/et_pb_text][\/et_pb_column][et_pb_column type=”2_3″ _builder_version=”4.16″ custom_padding=”|||” pac_dcm_carousel_specific_module_num=”0″ global_colors_info=”{}” custom_padding__hover=”|||”][et_pb_text admin_label=”Definition description” _builder_version=”4.27.4″ header_2_font_size=”32px” hover_enabled=”0″ header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}” sticky_enabled=”0″]<\/p>\n

What\u2019s the difference between gross and net profit?<\/p>\n

Gross profit<\/em> refers to the profit you make selling your goods and services after deducting your cost of goods sold (COGS).<\/p>\n

On the other hand, net profit<\/em> refers to the profit you make selling goods or services after deducting all<\/em> operating expenses and business costs.<\/p>\n

Thinking about gross profit vs. net profit comes down to how you’re looking to calculate your profitability and frame your business’s financial health.<\/p>\n

Gross profit explained<\/h2>\n

To understand gross profit, you need to comprehend COGS. COGS are the immediate expenses incurred in the production, handling, and distribution of your goods or services.<\/p>\n

(COGS does not include general overheads and operating expenses – like rent or power – or indirect business expenses like sales or marketing\u2014it only includes direct costs.)<\/p>\n

Gross profit formula<\/h2>\n

The formula used to calculate gross profit margin is as follows:<\/p>\n

Gross Profit = Revenue \u2013 Cost of Goods Sold<\/strong><\/p>\n

To express gross profit margin as a percentage the formula is as follows:<\/p>\n

Gross Profit Margin = (Revenue – COGS) \/ Revenue x 100<\/strong><\/p>\n

Net profit explained<\/h2>\n

On the other hand, net profit considers all overheads, expenses, and business costs on top of COGS. (It includes everything from rates and taxes<\/a> to rent and equipment costs.)<\/p>\n

A company’s net profit is thus a more complete picture of its overall profitability as it accounts for every cost incurred in running your entire business.<\/p>\n

Net profit formula<\/h2>\n

The formula used to calculate net profit<\/a> is as follows:<\/p>\n

Net Profit = Revenue \u2212 Total Costs<\/strong><\/p>\n

To express this as a net profit margin percentage the formula is as follows:<\/p>\n

Net Profit Margin = (Revenue \u2013 Total Costs) \/ Revenue x 100<\/strong><\/p>\n

[\/et_pb_text][et_pb_image src=”https:\/\/www.reckon.com\/nz\/wp-content\/uploads\/2023\/07\/gross_vs_net_profit.png” alt=”Gross Vs Net Profit” title_text=”Gross Vs Net Profit” admin_label=”Image” _builder_version=”4.21.0″ _module_preset=”default” global_colors_info=”{}”][\/et_pb_image][et_pb_text admin_label=”Definition description + related terms” _builder_version=”4.24.3″ header_2_font_size=”32px” header_2_font_size_tablet=”30px” header_2_font_size_phone=”26px” header_2_font_size_last_edited=”on|tablet” global_colors_info=”{}”]<\/p>\n

See related terms
<\/strong>What Is net profit?<\/a>
What Is gross profit?<\/a>
How to calculate net profit margin (with formula)?<\/a>
How to calculate gross profit margin?<\/a><\/p>\n

 <\/p>\n

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What\u2019s the difference between gross and net profit? Gross profit refers to the profit you make selling your goods and services after deducting your cost of goods sold (COGS). On the other hand, net profit refers to the profit you make selling goods or services after deducting all operating expenses and business costs. Thinking about […]<\/p>\n","protected":false},"author":6,"featured_media":264310,"menu_order":0,"template":"","meta":{"_et_pb_use_builder":"on","_et_pb_old_content":"","_et_gb_content_width":"","inline_featured_image":false,"_lmt_disableupdate":"no","_lmt_disable":"","footnotes":""},"class_list":["post-264308","glo","type-glo","status-publish","has-post-thumbnail","hentry"],"yoast_head":"\nGross Profit Vs Net Profit (Comparison) | Accounting Terms | Reckon NZ<\/title>\n<meta name=\"description\" content=\"What\u2019s the difference between gross and net profit? It's all about your COGS and operating expenses. 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