Be careful not to confuse gross profit with net profit. Gross profit is how much money you make less the raw cost of materials. Net profit is your final profit

Be careful not to confuse gross profit with net profit. Gross profit is how much money you make less the raw cost of materials. Net profit is your final profit after accounting for labor, marketing, support, overhead, taxes, and so forth. For example, take a look at the financials [1] for Black & Decker, a manufacturer of tools. For the quarter ending 4/4/2015, they had gross revenue of 2.6 billion. Less cost of goods sold, they have a gross profit of almost 1 billion, or about 61% gross margin. But then observe all of the numerous expenses and taxes they have, which causes their final Net Income (aka net profit) to drop to 162 million, or a net margin of about 9%. 9% can be considered an outstanding rate of return in this industry. If you could come up with a way to build a manufacturing company with such a return, you could have your own IPO. [1] https://www.google.com/finance?q=NYSE%3ASWK&fstype=ii&ei=-AmgVcm1EO32iQLLwICICA https://www.google.com/finance?q=NYSE%3ASWK&fstype=ii&ei=-Am...