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iii. Gross Profit
Gross profit somehow represents the difference between the price of all goods/service sold and their cost of production (minus certain fixed costs such as payrolls of regular workers). Qualitatively, this can be seen as indicator of the “value added” generated by the company. Please note that we consider that contract workers’ wages are included within the “Other purchases and external costs” field.
In practice, gross profit is not widely used in financial analysis because it does not fully represent the wealth generated by the operating cycle. The next indicator, the EBITDA, will bring a solution to this problem.