November 12, 2026 · 4 min read · NanoFora
Gross profit vs net profit: what each tells you
Clear definitions, formulas and a worked example of gross and net profit, plus what to do when either is falling.
Definitions
- **Gross profit** = revenue − direct costs (cost of sales).
- **Net profit** = gross profit − operating expenses − other expenses + other income − tax.
Worked example
Revenue 50,000; direct costs 20,000; operating expenses 18,000; tax 2,000.
- Gross profit = 30,000 (60% margin)
- Net profit = 10,000 (20% margin)
What each signals
Falling gross margin points to pricing or delivery costs. Healthy gross margin with weak net profit points to overheads.
Find them from your data
NanoFora calculates both from your ledger or from a reviewed bank statement P&L. For ratios, see profit margin ratios explained.
- gross profit vs net profit
- net profit formula
- gross margin
- profit calculation
Review your business records
Explore NanoFora’s financial analysis and review capabilities, or try the free financial calculators before uploading your records. Educational articles are not professional advice.
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