Should amortization be deducted from sales for the calculation of gross profit?
I want to evaluate profitability by customer. For that I'm looking at gross profit by customer. But I don't know what to do with amortization. Should I take it into account in the GP calculation or after GP?
Get the working capital your business needs from Entrepreneur Lending, powered by CAN Capital. Learn More »I'm used to the term gross margin rather than gross profit. You subtract only the cost of sales, also called direct costs, or unit costs . . . those things that go up and down with sales.
Some special industries include amortization as direct costs, like rental business--but that's rare.
And then some people talk about gross profit as gross margin less expenses. In that case, amortization, which is an expense, would count.