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How do you calculate gross profit based on the net profit?

Asked 3 years ago

As to calculating gross profit vs net profit, do I need to subtract my expenses beforehand? Is there a formula for calculating gross profit percentage from net profit? I understand that you would conventionally calculate the net profit once you already have the gross profit, but what if you don't have the net profit and need to work backwards from the gross profit?

Scottie Gordon

Monday, October 04, 2021

You do need to subtract expenses while calculating gross profit. There are formulas to calculate the % of gross profit and net profit. To calculate the gross profit percentage: (Revenue-Goods sold)/Revenue*100. To calculate the net profit percentage: (Net Income/Revenue)*100.

Izaiah Moss

Sunday, May 29, 2022

Before we move over to the formulae and calculation, we need to understand what gross profit and net profit EXACTLY show in your financial statements:

Net profit refers to your total income/revenue after deducting all expenses (G.P. - expenses). The formula for calculating net profit is:

Net Profit = Gross profit - Operating Expenses + Other Income

On the contrary, Gross profit refers to a company's profit before subtracting expenses.

Now let's move forward to the main question: How do you calculate gross profit from net profit?

You can easily calculate your gross profit from net profit by reversing this formula the other way around. Here's the mathematical expression at your disposal:

Gross Profit = Net Profit - Cost of Goods Sold

To calculate gross profit percentage or gross profit margin, use this formula:

Gross Profit Margin = [Gross Profit ÷ Net Sales] x 100

Bonus Tip:

To ensure your financial metrics (expenses and revenues) are always accurate, try BeProfit. The one-stop solution to track your finances and optimize your profits in no time.

Marty Wagner

Thursday, September 15, 2022

Calculating gross profit based on your net profit is pretty straightforward. It is only a matter of subtracting the COGS from the total revenue. The mathematical expression is as follows:

Gross profit = Net profit - COGS (cost of goods sold)

As for your query, you won't have to deduct the expenses beforehand as the net profit considers all the expenses and taxes.

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