Gross profit is defined as:

Gross profit is correctly defined as sales revenue minus the cost of goods sold (COGS). This measure reflects the amount of money a company retains after incurring the direct costs associated with producing the goods it sells. Essentially, it indicates how efficiently a company utilizes its resources in production and selling before accounting for other indirect expenses such as administrative costs, marketing, and taxes.

Understanding gross profit is critical for analyzing a company's profitability and operational performance. By focusing on the difference between revenue earned from sales and the immediate costs of generating that revenue, businesses can assess how well they're managing their inventory and direct production costs. This figure provides valuable insights for pricing strategies and overall financial health.