What is Gross Profit equal to?

• A. Revenue
• B. Net Income
• C. Gross Profit
• D. Operating Income

Answer: (C)

Gross profit is the profit earned from selling goods after accounting for the direct costs of producing or purchasing those goods. It is calculated by subtracting the cost of goods sold from revenue, so it shows how much money is left from sales to cover other expenses. For example, if you have $100,000 in sales and $60,000 in cost of goods sold, gross profit is $40,000. This figure is different from revenue (which is the total sales before subtracting costs), net income (which subtracts all expenses, taxes, and interest), and operating income (which is gross profit minus operating expenses). Gross profit focuses on the profitability of production and sales before other costs are considered, making it the best answer here.