Gross profit is the total profit of the organization, received from various kinds of activity. It can vary depending on what kind of company it is calculated for.
Accordingly, there are several types of gross profit, for each of which has its own calculation scheme. These are simple formulas for calculating, but for correct calculation, you need to know exactly the data for each of their components.
Formulas for calculating varieties of gross profit:
- The gross profit of the manufacturer is calculated by the formula: Gross Profit = Revenue from goods / services sold - cost of goods sold / services, including depreciation;
- Gross profit through turnover. Gross Profit = turnover * estimated surcharge / 100 - cost of goods / services;
- Gross profit of retail trade. Gross Profit = total revenue - cost of products and goods.
In each case, it is important to determine the cost price as accurately as possible, to include all the company's revenues entirety, as well as some expenses for production. Simplify this process can only professional and responsible accounting. The most common mistakes in calculating and analyzing gross profit appear if a person does not take into account the difference between a Gross Profit and a profit in its classical sense.
Usually, the accountant's services for calculating gross profit are required once a year. The data obtained indicate the results of the organization's activities. At the same time, it is important to remember that gross profit differs from net profit, it does not take into account some of the costs without that business cannot do, for example, deductions for marketing, salaries, management, maintenance of the building, etc.
For raising the gross profit, you need to increase revenue or purchase raw materials / materials / goods at a lower cost. A clear understanding of the additional opportunities to increase the Gross Profit makes it possible to increase the business profitability.