Question

Which of the following statements best describes the difference between net income and gross profit?
a.
Gross profit considers operating expenses while net income does not.
b.
Net income considers operating expenses while gross profit does not.
c.
Gross profit deducts taxes while net income does not.
d.
Net income deducts taxes while gross profit does not.


Please select the best answer from the choices provided

A
B
C
D

Answer 1

B

Gross profit = Sales − Cost of Goods Sold (does not include operating expenses, interest, or taxes). Net income = Sales − all expenses (COGS, operating expenses, interest, taxes), so net income does consider operating expenses while gross profit does not.