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Gross Profit

Trading Term

This is the amount of profit resulting from the differences in the sales prices of products and the cost of manufacturing the items or services. It can be an indicator of future profits. For example, the costs of providing a software program typically doesn’t increase in direct proportion to increases in the number of clients that use the technology. If the software is already profitable and a company adds customers, its profits will grow much faster than a manufacturer that has to increase its manufacturing—and its expenses—as its sales increase.

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