Which statement is TRUE regarding gross profit?

The correct statement regarding gross profit is that it is equal to net sales minus cost of goods sold. This definition captures the essence of gross profit, which reflects the profitability of a company's core business activities, excluding other expenses and income sources. Gross profit allows businesses to assess how efficiently they are producing their goods and services relative to their sales revenue.

Gross profit is calculated before taking into account operating expenses, taxes, or interest, providing insight into how much money remains after the costs directly associated with production are covered. This metric is crucial for evaluating a business's operational efficiency and pricing strategies.

In contrast, the other statements lack accuracy regarding the definition or positioning of gross profit within financial reporting. For example, equating gross profit with operating expenses or net income overlooks the distinct nature of each term and misrepresents how they relate to a company's financial performance. Additionally, describing gross profit as the "top line" of the income statement mistakenly conflates gross profit with total revenues, which are reported above gross profit in the income statement.