1. What is GP %?

GP % (Gross Profit Percentage) is a financial metric that shows the proportion of money left over from revenues after accounting for the cost of goods sold. It indicates how efficiently a company is producing and selling its products.

2. How Does the Calculator Work?

The calculator uses the GP % formula:

Where:

• Gross Profit — Total revenue minus cost of goods sold ($)
• Revenue — Total sales income ($)

Explanation: The formula calculates the percentage of revenue that exceeds the cost of goods sold, showing the profitability of core business operations.

3. Importance of GP % Calculation

Details: GP % is crucial for assessing business profitability, pricing strategies, and operational efficiency. It helps in comparing performance across periods and against industry benchmarks.

4. Using the Calculator

Tips: Enter gross profit and revenue in dollars. Both values must be valid (gross profit ≥ 0, revenue > 0).

5. Frequently Asked Questions (FAQ)

Q1: What is a good GP %?
A: A good GP % varies by industry. Generally, higher percentages indicate better profitability, but benchmarks differ across sectors.

Q2: How is gross profit different from net profit?
A: Gross profit is revenue minus cost of goods sold, while net profit subtracts all expenses including operating costs, taxes, and interest.

Q3: Can GP % be greater than 100%?
A: No, GP % cannot exceed 100% as gross profit cannot be greater than total revenue.

Q4: How often should GP % be calculated?
A: Businesses typically calculate GP % monthly or quarterly to monitor profitability trends and make timely adjustments.

Q5: What factors can affect GP %?
A: Pricing strategies, cost of raw materials, production efficiency, and sales mix can all impact gross profit percentage.