Gross profit vs net profit (comparison)
A business’s gross profit is the money it has left after paying for the goods and services it sold. Its net profit is the money left after paying absolutely all expenses and taxes.
The difference between gross profit and net profit is operating expenses and taxes
Is money you make on sales
Creates a pool of cash for running the business
Does not guarantee a net profit
Net profit
Is surplus cash (money made) after all expenses have been paid
Can be distributed to owners or reinvested into the business
See related terms
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Disclaimer
This glossary is for small business owners. The definitions are written with their requirements in mind. More detailed definitions can be found in accounting textbooks or from an accounting professional. Xero does not provide accounting, tax, business or legal advice.
