Draft reference — content review pending
Gross Profit
Revenue remaining after subtracting the direct costs assigned to the included goods or services.
Business question
How much remains after the direct cost of delivering the included goods or services?
Formula
Gross profit = included revenue − cost of goods sold or other direct delivery costs.
Calculation notes
Define which labor, materials, fulfillment, subcontracting, or delivery costs are treated as direct for this business model.
Edge-case guidance
Service businesses may classify direct costs differently from product businesses. Record the policy and avoid comparing figures built on different classifications.
Required data
| Input | Type | Status | Available source hints |
|---|---|---|---|
| Included revenueRevenue covered by the selected reporting period and scope. | Currency | Required | Accounting software · Excel |
| Direct costsCosts directly assigned to delivering the included goods or services. | Currency | Required | Accounting software · Excel |
Interpretation
Use gross profit to understand the contribution left before operating expenses. The direct-cost policy must stay consistent across periods.
Caution
Gross profit is only comparable when revenue scope and direct-cost classification are consistent. It is not a substitute for net profit or cash flow.
Implementation recommendation
Agree on a direct-cost policy with the finance owner and review the treatment of service labor, fulfillment, and subcontractors.
Target guidance
Set the first target from a comparable historical baseline for gross profit, then adjust it for strategy, capacity, seasonality, data quality, and relevant market or regulatory context. Review the direction with the accountable business owner rather than treating any external benchmark as universal.