What is the difference?

Gross Profit vs Gross Margin

Gross Profit

Gross Margin

What is it?

Gross Profit is the amount left over from total revenues after Cost of Goods Sold (COGS) has been deducted. COGS will typically include the cost of making and selling the product or the cost of services provided by the company.

Gross Margin is a profitability ratio that measures Gross Profit as a percentage of total revenue. Typically, it is calculated as Gross Profit divided by revenue.

Formula

ƒ Sum(Revenue) - Sum(COGS)
ƒ Sum(Gross Profit) / Sum(Revenue)

Example

An Oil & Gas company generated a total revenue of \$1 million in 2019, and incurred a COGS of \$400,000 in that same year. Therefore, the company's gross profit for 2019 was \$600,000.

If a florist has a revenue of \$15,000 and Cost of Goods Sold is \$6,000, their Gross Margin will be: (\$15,000 - \$6,000) / \$15,000 = 60%

Published and updated dates

Date created: Feb 21, 2019

Latest update: Mar 15, 2021

Date created: Feb 16, 2019

Latest update: Nov 16, 2020