Just an aside here to get some terminology straight.
- Sales, Gross Income, Revenue - these are usually the same thing: the money you receive for delivering the goods or services from your company. It is just the money you have taken in - no expenses are deducted from it.
- Gross Profit, Gross Earnings - these are the income or sales figures minus the cost of the goods sold. So if you make a widget for $25,000 and sell it for $100,000, your gross profit or gross earnings is $75,000. If you are in a service or software business, the cost of goods sold is the salaries you pay people to deliver the service or code the software. Indirect expenses like administration, R&D, and the expenses to deliver or sell the goods are excluded from the cost of the goods sold.
- Net Profit, Net Earnings, Net Income - the "bottom line": start with the gross income and subtract all the direct and indirect costs of doing business. Theoretically, this is the money that is left and can be distributed to the shareholders or partners
So you see it's important when someone says their profit was $1,000,000 last year that you know whether they are talking about gross or net. All in all you want the highest net profit (or earnings or income) possible.
