Calculating gross profit, or gross income as it is also known, is essential to understand a company’s financial health. Gross profit margin indicates what percentage of funds are available after the cost of goods have been deducted from revenue. The higher this percentage is, the more funds are available to reinvest in the company.

Sound simple? To help you get to grips with understanding gross profit, we have produced the following infographic. Learn the difference between fixed and variable costs that need to form part of your calculations and what steps you can take to reduce profit “leakage”.

Understanding Gross Profit Infographic

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