# How do calculate gross profit ratio?

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Subtract the cost of sales from sales volume. Sales volume is the number of units sold times the selling price of one unit, i.e. the total of the money accepted in your shops for your goods. The cost of sales (or cost of goods sold, COGS) is the expense incurred from manufacturing a unit of the product times the number of the products you have sold. Only direct expenses (material and labor) count. Thus, gross profit is the difference between the income from selling your wares (or services) and what it cost you to manufacture or buy those wares.