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Gross vs net

Gross and net are two financial terms that are sometimes confused. We will look at the difference in meaning between the two financial terms gross and net and some examples of their use in sentences.

The financial term gross refers to total income before deducting expenses. The gross income of a person or company reflects the total intake of revenue and does not consider the cost of doing business. Gross income is a figure that indicates the possibilities for profit but does not always reflect the true success of an individual or company.


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The financial term net refers to the total gross income minus expenses. Net income is the profit attained by an individual or a company, calculated by subtracting expenses from gross income. Expenses may include such things as overhead, interest, depreciation and taxes. It is possible to have a positive gross income and a negative net income when such expenses are high.

Examples

Much stays the same, but there are increases in income phase-outs for IRA contributors, to the adjusted gross income limits for snagging the saver’s credit, and to the overall defined contribution plan limit—up to $54,000–a boost for self-employed and small business owners and workers who have the option of stuffing their retirement nest egg with aftertax dollars. (Forbes Magazine)

Although the U.S. economy is moving relatively slowly, Roberts pointed out American consumers are the strongest element within the economy, which is measured by gross domestic product, or the total value of goods and services. (The Commercial Appeal)

Penske Automotive Group Inc.’s third-quarter net income rose 1.1 percent as gains in gross profit margins in the U.S. for new and used vehicles were offset by foreign exchange-related losses and lower global profit margins for vehicle sales. (Crain’s Detroit Business)

 

 

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