1. What Is Operating Profit?

Operating Profit (OP) represents the profit earned from a company's core business operations, excluding interest and taxes. It measures how efficiently a company is generating profits from its primary activities.

2. How Does The Calculator Work?

The calculator uses the operating profit formula:

Where:

• \( Revenue \) — Total sales revenue generated from business operations
• \( COGS \) — Cost of Goods Sold (direct costs of producing goods)
• \( OpEx \) — Operating Expenses (indirect costs of running the business)

Explanation: Operating profit shows the profitability of core business activities before considering financing costs and tax obligations.

3. Importance Of Operating Profit

Details: Operating profit is a key indicator of business efficiency and operational performance. It helps investors and managers assess how well the company is managing its core operations and controlling costs.

4. Using The Calculator

Tips: Enter revenue, COGS, and operating expenses in USD. All values must be non-negative. The calculator will compute the operating profit, which represents earnings before interest and taxes.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between operating profit and net profit?
A: Operating profit excludes interest and taxes, while net profit includes all expenses including interest, taxes, and non-operating items.

Q2: What are typical operating profit margins?
A: Varies by industry, but generally 15-20% is considered good. Technology companies often have higher margins than retail businesses.

Q3: How can a company improve operating profit?
A: By increasing revenue, reducing COGS through better sourcing, or controlling operating expenses through efficiency improvements.

Q4: Is operating profit the same as EBIT?
A: Yes, Operating Profit is essentially the same as EBIT (Earnings Before Interest and Taxes) in most contexts.

Q5: Why is operating profit important for investors?
A: It shows the core profitability of business operations, helping investors assess operational efficiency and compare companies within the same industry.