 In this discussion, we will discuss the discussion question of describe gross profit and how it is used. When considering gross profit, we're talking about a term that will be used for a merchandising company. And gross profit is going to be included in the multiple step income statement. We don't see it for the service company. We don't see it in the single step income statement. And it is comparing the sales less the cost of goods sold, giving us the gross profit. So it's going to be, and we might want to be more specific, we could say it's net sales rather than sales, meaning it's sales less the returns and allowances, which is really kind of the same as the sales number because the returns and allowance are contra sales accounts. So it's really kind of sales or net sales minus the cost of goods sold. It's going to be an important calculation because the relationship between the gross profit and the cost of goods sold if we sell merchandise is going to be huge. In other words, the cost of goods sold is the expense related to us selling merchandise or using the inventory asset of inventory to help generate revenue. And so that's going to be our one of our hugest expense, probably our largest expense if we are a merchandising company. And therefore we want to see that specific relationship related to the gross profit. And we can also use a ratio and take that gross profit divided by sales and look at what we're walking away with on a percentage basis after each sale. So for each dollar sale, how much are we getting in terms of gross profit? Often a useful number for when we're going to be analyzing a company that sells inventory. And then of course, once we have the gross profit, we will be reducing it to get to the bottom line of the income statement by all the other expenses and that will be the all the other operating expenses to get to net income at the end of the day. So gross profit is going to be that major one major component, one major step, one major breakout that we will have in the multi step income statement along the way through the path to the net income.