Gross Profit of a business is the excess of sales over the cost of goods sold. In other words, it is the amount of money a company earns from the sales of its products or services after deducting the direct cost of producing those products or services. Direct costs include expenses such as raw materials, labor costs directly involved in production, and any other expenses that are directly associated with producing and selling the product. Gross profit is an important measure of a company's financial performance and is used in calculating other financial ratios such as gross profit margin.