Operating Profit

The operating profit of a company is the total earnings from its core business functions for a given period, excluding interest and taxes. It also excludes profits from ancillary investments, such as earnings from other businesses in which a company has a stake. An operating loss occurs when core business income falls short of expenses.

Operating Profit can be calculated by removing Operating Expenses, Depreciation, and Amortization from Gross Profit.

Operating profit is also known as Earnings before interest and tax (EBIT), as interest and taxes are non-operating expenses. Unlike EBIT, it does not include non-operating income.

Several extraneous and indirect factors that can obscure a company’s true performance are eliminated by operating profit. The operating profit margin demonstrates how well a company converts gross revenue to this figure.

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