What distinguishes gross profit from net profit?

Gross profit is calculated by subtracting the cost of goods sold (COGS) directly from total revenue, reflecting the company's efficiency in producing and selling its goods. This figure does not account for other expenses such as administrative costs, taxes, or interest. Net profit, on the other hand, starts from gross profit and subtracts all operating expenses, interest, and taxes, ultimately providing a clear picture of a company's profitability after all expenses have been deducted.

This distinction highlights the levels of profitability that businesses assess. Gross profit focuses solely on the core business activities, while net profit provides a comprehensive view of overall financial health. Understanding this difference is key for analyzing a company's financial statements and determining performance metrics.

In the context of the other options, they inaccurately describe the relationship between gross and net profit, leading to confusion. For instance, some options suggest that gross profit includes all expenses or is computed after taxes, which misrepresents their definitions. Therefore, the understanding of gross profit being the revenue minus COGS and net profit being derived from gross profit after all other expenses is essential.