Calculation, gross profit formula and maths. That\u2019s a lot of scary words in one sentence, eh? \ud83d\ude28<\/p>\n\n\n\n
But, sometimes you have to face up to your fears. \ud83e\uddb8 It\u2019s a cliche. We know. But, when it comes to owning your own business and managing your finances, there\u2019s no hiding. <\/p>\n\n\n\n
Peekaboo.<\/em> We’re going to tell you exactly how to calculate your gross profit <\/a>formula. <\/p>\n\n\n\n Gross profit formula refers to the way in which you calculate your total revenue minus costs.\u00a0Gross profit means a business\u2019s total profit before deducting costs such as expenses<\/a>, overheads, and taxes<\/a>.\u00a0<\/p>\n\n\n\n If you\u2019re not financially savvy or, you\u2019re just human, all this jargon can be quite confusing! Let\u2019s break it down \ud83d\udc47<\/p>\n\n\n\n Before we hand over the formula, here\u2019s a little context. Generally, gross profit <\/a>includes variable costs and does not account for fixed costs. \ud83e\uddf0<\/p>\n\n\n\n Revenue is the amount of money made from sales of a company\u2019s products and\/or services during a specific time period (normally a year), before any expenses, taxes etc. are deducted. <\/p>\n\n\n\n Gross profit assesses a company’s efficiency at using its labour and supplies in producing goods or services. \ud83d\udccb<\/p>\n\n\n\n These may include: <\/p>\n\n\n<\/div> \n\n Gross profit = Revenue – Cost of goods sold<\/strong><\/p>\n\n <\/div>\n<\/div> \n\n Here\u2019s an example: <\/p>\n\n\n\n Let’s say your annual revenue is \u00a330,000, and your cost of goods sold is \u00a37,000. <\/p>\n\n\n\n Gross profit = \u00a330,000 – \u00a37,000. <\/p>\n\n\n\n So, you have a gross profit of \u00a323,000. \ud83e\udd11<\/p>\n\n\n\n Gross profit percentage = gross profit \u00f7 sales revenue x 100<\/strong><\/p>\n\n <\/div>\n<\/div> \n\n Let\u2019s continue with the example above. <\/p>\n\n\n\n Your gross profit is \u00a323,000 and your revenue is \u00a330,000. <\/p>\n\n\n\n So, \u00a323,000 \u00f7 \u00a330,000 x100 = 77% \ud83d\udcb8<\/p>\n\n\n\n Great question! To calculate your gross profit you\u2019ll need to keep track of your business’s income and expenses, which is no easy task. \ud83d\udd75\ufe0f<\/p>\n\n\n\n Unless you use our free bookkeeping tools<\/a>, of course. \ud83d\ude4c<\/p>\n\n\n\n But, that\u2019s not all. Find out more about how our free bookkeeping tools can help you with all <\/em>aspects of your business \ud83d\udc47<\/p>\n\n\n\nWhat does gross profit formula mean?<\/h2>\n\n\n\n
How to calculate gross profit<\/h2>\n\n\n\n
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Which formula is used to calculate gross profit?<\/h3>\n\n\n<\/div> \n\n
Which formula is used to calculate gross profit as a percentage?<\/h3>\n\n\n<\/div> \n\n
What do I need to keep track of to calculate my gross profit?<\/h2>\n\n\n\n
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