Looking only at gross profit, this simple P&L would seem to spell trouble for Company B, which is lagging well behind Company A. But net profit is the same for both. The difference lies in how they each account for job costs and overhead.
Looking only at gross profit, this simple P&L would seem to spell trouble for Company B, which is lagging well behind Company A. But net profit is the same for both. The difference lies in how they each account for job costs and overhead.

I'm always fascinated by the fact that more attention seems to be paid to gross profit than to net profit. For those of you who are still fuzzy on the difference, here's a quick review.

Total sales is the amount of money you collect for the projects you build (although some may call it "income" or "revenue" or "volume"). From this amount, two types of expenses must be paid. The first are type above-the-line expenses, which are also called "cost of goods sold" or "job costs."...

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