Which term best matches the definition: Net sales (gross sales less returned merchandise, discounts, or other allowances) minus cost of goods sold; also referred to as 'Gross Margin'.

• A. Net Income
• B. Gross Profit
• C. Revenue
• D. Operating Income

Answer: (B)

Gross profit shows the profitability of the goods you sell after covering the direct cost to produce or acquire them. You start with net sales (gross sales minus returns, discounts, and other allowances) and then subtract the cost of goods sold. What remains is the amount available to cover other expenses and still leave a profit, which is also called gross margin. This differs from net income (which subtracts all expenses, taxes, and interest), revenue (the total inflow before any costs), and operating income (profit after operating expenses). So the term that matches this definition is gross profit.