Gross profit is what you get when you subtract the Cost of Goods Sold (COGS) from total revenue. It shows how much money is left from sales after covering the direct costs of producing or purchasing the goods.
Formula: Gross Profit = Revenue - COGS. If a company earns $500,000 in revenue and COGS is $300,000, gross profit is $200,000.
Gross profit is the first layer of profitability. It tells you whether your pricing and production costs are sustainable before accounting for overhead like rent, salaries, and marketing.