Bruttofortjeneste is a central concept in accounting and financial management, which shows the difference between a company's turnover and its consumption of goods. It is therefore the profit that is left when the costs of the goods sold or raw materials have been subtracted from the sales, but before other operating costs such as wages, rent, marketing and administration have been taken into account.
Formel
Gross profit is typically calculated like this:
Gross profit = Revenue – Product consumptionExample
A company sells goods for DKK 1,000,000 in a year. In order to be able to sell the goods, the company has had a consumption of goods of DKK 600,000:
Bruttofortjeneste = 1.000.000 kr. – 600.000 kr. = 400.000 kr.The company therefore has DKK 400,000 in gross profit, which must cover all other expenses and hopefully make a profit in the end.
Gross margin and gross profit
The term is often confused with bruttoavance. Gross profit is the gross profit measured as a percentage of turnover. It shows how much of the turnover is left after the consumption of goods has been deducted.
Formel:
Gross profit (%) = (Gross profit / Revenue) × 100Why is gross profit important?
- It gives a clear picture of how profitable a company's core business is without other operating expenses coming into play.
- It makes it possible to compare with other companies in the same industry.
- It helps management assess whether pricing and purchasing policy is effective.