Profit is what remains of revenue once costs are subtracted — but there is not one profit figure. There are several, each subtracting a different kind of cost. Reading them in order is like peeling an onion.
| Profit measure | What it subtracts from revenue | What it tells you |
|---|---|---|
| Gross profit | Cost of goods / services | The basic economics of what is sold |
| EBITDA | Also operating expenses | Operating performance before accounting and financing effects |
| EBIT (operating profit) | Also depreciation and amortisation | The profit the business itself generates |
| Net profit | Also interest and tax | What is left for shareholders |
From profit to margin
Absolute profit numbers are hard to compare — a ₹500 crore profit sounds large until you learn it came from ₹50,000 crore of revenue. Turning profit into a percentage of revenue gives you a margin, which travels much better between companies and across years.
Margin (%) = Profit measure ÷ Revenue × 100
A gross profit of ₹300 crore on revenue of ₹1,000 crore is a 30% gross margin. A net profit of ₹100 crore on the same revenue is a 10% net margin.
- A falling gross margin suggests input costs are rising faster than prices can be raised.
- A falling operating margin suggests the cost of running the business is growing.
- A gap between operating and net margin usually points to interest costs or tax.
Margin waterfall
Follow revenue down through every cost to reach net profit, and see each margin form.
The top line
60% gross margin
40% EBITDA margin
30% operating margin
18.8% net margin
Gross margin
60%
EBITDA margin
40%
Operating margin
30%
Net margin
18.8%
Profit is not the same as cash