Step [1] – Revenue (also called Sales or Top Line):
This is the total amount of money a business earns from selling goods or services before any expenses are deducted.
“Revenue – all the money that came in.”
Step [2] – Gross Profit:
This is what’s left from Revenue after subtracting the Cost of Goods Sold (COGS). COGS includes direct costs like materials and labor used to produce the product.
“Gross Profit – money left after making the product, but before paying bills.”
Formula:
Gross Profit = Revenue – Cost of Goods Sold
Step [3] –Net Profit: Net Profit (also called Bottom Line or Net Income
“Net Profit – what you actually keep in the end.”)
