Gross profit can be described as:

Gross profit is defined as the difference between revenue and the cost of goods sold (COGS). This metric is essential in assessing a company's efficiency in producing and selling its goods. It represents the amount available to cover operating expenses, taxes, interest, and ultimately contribute to net income, which is why it serves as a key performance indicator for businesses.

The formula for calculating gross profit is straightforward: you take total revenue from sales and subtract the direct costs associated with the production of those goods, which is the COGS. The resultant figure gives insight into how well a company is managing its production costs relative to its sales revenue.

Understanding gross profit is crucial in determining the viability of a business’s main operational activities. It helps assess whether the pricing of products is adequate to cover costs and allows for evaluating product profitability.

In contrast, total revenue including expenses does not focus solely on the operations of generating profit from sales. Net income after all expenses goes beyond gross profit as it accounts for operating expenses, taxes, and other costs, thus providing a different perspective on a company's profitability. Finally, stating total revenue before deductions overlooks the necessary deduction of COGS to arrive at gross profit, failing to show the immediate profitability of sales activities.