# How to Calculate Gross Profit

A short tutorial on What is gross profit and how to calculate the gross profit with simple example problems.

## Gross Profit Calculation Formula and Example

Gross profit aids to evaluate the company's financial health and business model by identifying the total amount of money left over from revenues after accounting for the cost of goods sold (COGS). How do you calculate gross profit? A short tutorial that explains on how to calculate gross profit in simple steps with example.

A gross profit will appears on the company's income statement which can be calculated using gross profit calculation formula and example.

Gross Profit Formula:

**Gross Profit = Revenue - Cost of Goods Sold**

To calculate revenue, following formula is to be used:

**Revenue = Net Sales - Sales Returns**

**Gross Profit Example:**

Calculate gross profit for net sales of Rs. 6000, cost of sold goods as Rs. 600 and return of sales as Rs. 3600.

**Given**

Gross Profit - Rs.6000

Cost of Sold Goods - Rs.600

Return of Sales - Rs. 3600

**Step: 1**

Substitute the values in the Revenue formula,

Revenue = Net Sales - Sales Returns

= 6000 - 3600

= Rs 2400

**Step: 2**

Substitute the values in the Gross Profit formula,

Gross Profit = Revenue - Cost of Goods Sold

= 2400 - 600

= Rs 1800

The Gross Profit value is Rs 1800.

Gross Profit Calculation with Example is briefly discussed. You can also use our online "how to calculate gross profit" calculator for free by clicking on the link.

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