Definition of Gross income:
The amount by which sales revenue exceeds production costs (cost of sales).
Though operating income gives a more accurate picture of a companys profitability, gross income provides a top-line view of a companys production or (in case of a merchant) sales related cost structure. It is a measure of how well (or badly) a company is utilizing its capital, capacity, and other resources, and shows its competitive strengths and weaknesses in comparison with other companies in the same industry. A high gross income means stability in times of economic downturn because the company can afford to cut prices; a low gross income may mean low creditworthiness or inability to fight off competition. A falling gross income shows cost of production is rising faster than the selling price, or that inventory is shrinking due to stealing or spoilage. It is allocated to employees as wages, to lenders as interest, to investors as dividends, to government as taxes, and to the company as reinvestment. When expressed as a percentage of cost of sales, it is called gross margin. Also called gross profit or value added.
How to use Gross income in a sentence?
- The gross income of the company was far higher than its operating income because of high costs for research and development.
- The CEO strode confidently into the boardroom. The gross income of the company had surged upward since he had instituted his new policies, and he knew that the board was going to give him a bonus for the results he had achieved.
- The companys gross income grew considerably this year because our sales showed dramatic improvement while our production costs did not increase.
Meaning of Gross income & Gross income Definition