Final answer:
Another term for gross profit is gross margin, which is calculated by subtracting the cost of goods sold from total revenues. It's different from net profit, operating profit, and net margin, which account for different levels of expense deduction. Thus, the option 3 is correct answer.
Step-by-step explanation:
The term gross profit can also be referred to as gross margin. Gross profit, or gross margin, is calculated by subtracting the cost of goods sold (COGS) from total revenues. This figure represents the profit a company makes after deducting the costs directly associated with the production of the goods it sells or the services it provides. It is important not to confuse gross profit with net profit, operating profit, or net margin as these terms involve different levels of expense deduction.
An understanding of the key terms such as accounting profit, which is total revenues minus explicit costs including depreciation, and economic profit, which includes both explicit and implicit costs, is fundamental when discussing profitability. It's crucial to keep in mind that accounting profit is what businesses pay income taxes on, but economic profit defines their overall success.