Gross profit is calculated by subtracting what from revenue?

Gross profit is derived by subtracting the Cost of Goods Sold (COGS) from total revenue. This calculation reflects the direct costs attributable to the production of the goods sold by a company. By focusing specifically on COGS, the calculation provides insight into how efficiently a company is using its resources to produce products. It helps determine a company's production effectiveness, allowing stakeholders to assess whether the pricing strategy is adequate to cover both the direct costs of production and the fixed and operational costs that will come into play later in the profit and loss statement.

The other options do not directly relate to the calculation of gross profit. Operating expenses are incurred after the calculation of gross profit and impact net profit. Taxes are determined after net profit is calculated and do not factor into gross profit either. Fixed assets concern the long-term tangible property used in production and are not included in the computation of gross profit.