The three measures of profit-gross profit, operating profit, and net profit-give the same insight into the overall efficiency of a firm in generating profit.

Question

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Each measure of profit provides different insights into the financial performance of a firm. Gross profit shows the profitability of a company’s products or services before operating expenses are deducted. Operating profit represents the profit generated from a company’s core business operations after deducting operating expenses. Net profit, also known as the bottom line, is the profit remaining after all expenses, including taxes and interest payments, are deducted from revenue. Therefore, while all three measures of profit are important, they offer different perspectives on a firm's profitability.

The Three Measures of Profit-Gross Profit, Operating Profit, and Net