Operating Profit


DEFINITION of 'Operating Profit'

The profit earned from a firm's normal core business operations. This value does not include any profit earned from the firm's investments (such as earnings from firms in which the company has partial interest) and the effects of interest and taxes.

Also known as "earnings before interest and tax" (EBIT) or "operating income".

Calculated as:

Operating Profit = Operating Revenue - COGS - Operating Expenses - Depreciation & Amortization


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BREAKING DOWN 'Operating Profit'

For example, suppose ABC Printing Company earns $50 million from its core printing related operations, $10 million from its 40% stake in XYZ Corp. and $3.5 million from interest earned in its money market and bank accounts. In addition, the company spends $10 million in production related costs.

Overall, the company's operating profit is $40 million. This is calculated as the $50 million in operating revenue million minus the $10 million in production costs. The other $10 million and $3.5 million in earnings are not included in operating income because they are investment income.

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