Gross Profit VS Gross Margin

You might think that whether these two terms are the same or not. Some say that these are the same and some oppose it. In fact, these two terms are different. Let me explain you in the below section: 

What is Gross Profit 

Gross Profit is the difference between Your Business Net Sales - Cost of Goods Sold (Cost of Sales) and it is the amount expressed in Rs. or Dollar or whatever Currency your country has. If Cost of Sales is more than Net sales, then the business suffers Gross Loss.

Whereas 

Gross Margin

It is the ratio of Gross Profit to Net Sales. It shows the relationship between these two Accounting Terms. Mathematically, we write it as: 

  

Gross Margin = Gross Profit / Net Sales x 100 

Gross Margin is expressed in Percentage (%) as it shows the relationship between Gross Profit / Income To Net Sales.

For Example, if the Net Sales of the business during the month is Rs. 500000 and Gross Profit is Rs. 300000, then Gross Margin is: 

  

300000 / 500000 x 100 = 60%

It means that Gross Margin on Sales is 60%. 

  

Note: Gross Profit is also called Gross Net Income In American Accounting Style whereas Gross Profit is the Accounting Term used in British Accounting System.