Notes

How do you calculate gross wages?

Two critical profitability metrics for any business include gross profit and net income. Gross profit represents the income or profit remaining following the production costs have now been subtracted from revenue. Revenue is the quantity of income generated from the sale of a company's goods and services. Gross profit helps investors to determine just how much profit a business earns from the production and sale of its goods and services. Gross profit may also be referred to as gross income.

On the other hand, net income is the profit that remains all things considered expenses and costs have been subtracted from revenue. bruto naar netto salaris Net income or net profit helps investors determine a company's overall profitability, which reflects on how effectively a business has been managed.

Understanding the differences between gross profit vs. net income will help investors determine whether an organization is earning a gain, and or even, where the business is losing money.

Gross Profit
Gross profit, operating profit, and net income refer to the earnings that a company generates. However, every one represents profit at different phases of the production and earnings process.

Gross profit is just a company's profits earned after subtracting the expenses of producing and selling its products—called the price of goods sold (COGS). Gross profit provides insight into how efficient a company are at managing its production costs, such as labor and supplies, to produce income from the sale of its goods and services. The gross profit for a company is calculated by subtracting the price of goods sold for the accounting period from its total revenue.

Revenue
Revenue is the total sum of money earned from sales for a specific period, such as for example one quarter. Revenue may also be listed as net sales because it might include discounts and deductions from returned or damaged merchandise. For instance, companies in the retail industry often report net sales as their revenue figure. The item that has been returned by their customers is subtracted from total revenue. Revenue is often known as the "top line" number since it is situated at the top of the income statement.

Shipping costs
We are able to see from the COGS items in the above list that gross profit mainly includes variable costs—or the expense that fluctuate depending on production output. Typically, gross profit doesn't include fixed costs, which are the expense incurred regardless of production output. As an example, fixed costs might include salaries for the corporate office, rent, and insurance.

However, some companies might assign some of the fixed costs utilized in production and report it predicated on each unit produced—called absorption costing. For example, let's say a production plant produced 5,000 automobiles in a single quarter, and the company paid $15,000 in rent for the building. Under absorption costing, $3 in costs could be assigned to each automobile produced.

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