Operating Profit Definition
Operating profit is a company’s total revenue minus its operating expenses. Operating expenses include things like cost of goods sold, selling, general, and administrative expenses. In order to calculate operating profit, you need to first subtract the cost of goods sold from the total revenue. This will give you the gross profit. From there, you will subtract the SG&A expenses. The result is the operating profit.
Operating profit is important because it show how much a company is making after all of its basic costs are covered. It can be used to compare companies within the same industry or sector. A high operating profit margin indicates that a company has good cost control and is efficient.
