Profit occurs when a company’s sales revenue exceeds expenses. There are three main types of profit: gross profit, operating profit, and net profit. If you work in accounting, understanding these concepts is essential for analyzing the financial health of your organization and devising sound approaches to achieve revenue goals. This article defines gross profit vs. net income and profit margins and examines their four key differences.

Running a business requires a solid understanding of finances. Blind confidence in concepts and methods will only take you so far. You cannot scale sustainably until you observe how your efforts affect your bottom line. A profit and loss statement is meant to help you quickly assess your company’s financial situation. The assertions can provide an accurate depiction of your direction over time, letting you know whether you’re moving in the right route or not.