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Answer :
Gross profit, also known as gross margin, is calculated as revenue minus the cost of goods sold, which represents the excess of revenues over out-of-pocket expenses directly related to production.
Gross profit (gross margin) is equal to revenue minus the cost of goods sold (c). Gross profit, also referred to as accounting profit, is the excess of revenues over out-of-pocket expenses. This measure is crucial in understanding a company's financial health as it reflects the money left after covering the costs directly related to producing the goods sold. In accounting terms, this is the amount that newspapers often report as a corporation's "profits" for a given time period. Operating expenses and taxes are not deducted from revenue to calculate gross profit; they are considered later to determine operating income or net profit.
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Final answer:
Gross profit (gross margin) is equal to revenue minus the cost of goods sold, which represents the company's core profitability from its primary activities. Therefore, in response to the question, gross profit (gross margin) is equal to revenue minus the cost of goods sold. This means the correct answer is option (c).
Explanation:
Gross profit, also known as gross margin, is a financial metric used to assess the profitability of a company's core activities without considering indirect costs. It is calculated as revenue minus the cost of goods sold (COGS). This calculation gives a company insight into the efficiency of its production process and its pricing strategy. Accounting profit, on the other hand, includes all revenues and subtracts all expenses, including operating and non-operating expenses, to arrive at the net income.
Therefore, in response to the question, gross profit (gross margin) is equal to revenue minus the cost of goods sold. This means the correct answer is option (c).
