Gross profit and net profit are key financial metrics that measure a company's profitability at different levels:
What is the key difference between gross profit and net profit?
Gross profit only accounts for direct costs (COGS), while net profit reflects all expenses, providing a clearer picture of overall profitability.
Why is gross profit important for a business?
Gross profit shows how efficiently a company produces and sells goods, helping businesses set pricing strategies and control production costs.
How do investors use net profit?
Net profit is used to evaluate a company’s financial health, profitability, and ability to generate returns for shareholders.
Can a company have a high gross profit but a low net profit?
Yes. If operating expenses, taxes, or interest payments are too high, a company can have strong gross profit but still report low or negative net profit.
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