Gross vs. Net

Gross vs. Net

Gross and Net are terms which tell us, if the amount, object or any other thing contains or do not contain something deductible.

Gross is the term which we use to refer to the amount before we make any deductions. Many things can be expressed in gross values, like for example: gross income, gross weight or gross estate.

The deductions which are made from the gross values, also may indicate many things. So, for example, gross income is the income which we earn before deducting taxes. Gross weight is the total weigh of product, including its packaging. Gross estate is the total value of a person's estate before deductions of any costs like for example taxes, living and funeral expenses or any other administration costs.

Net is the term opposite to the gross and refers to the amount after we have done any deductions. So, net income is the income we receive after paying taxes. Net weight is the weight of product without a packaging. Finally, net estate is the net value of a person's estate after all different costs, taxes and other payments, have been deducted.

It is also worth to mention the difference between gross margin and net margin, which are often used as indicators of a company's profitability. Gross margin is calculated as the quotient of gross profit and revenues. Gross profit is the difference between the total revenues from the sale of goods or services and the costs of raw materials and other production costs which have been born in order to produce the sold goods or services.

Net margin, on the other hand, is the quotient of net profit and revenues. Net profit is the difference between the total revenues from the sale of goods or services, and all costs, which company have: production costs, investment costs , financial costs or taxes.

So in summary:

GROSS VALUE - DEDUCTIONS (tax, package, costs) = NET VALUE

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