Operating Profit

Dictionary Says

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).

Calculated as:

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

Investopedia explains '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.

Sign Up For Term of the Day!

Try Our Stock Simulator!

Test your trading skills!

Related Definitions

  1. Earnings Before Interest & Tax - EBIT

    An indicator of ...
  2. Revenue

    The amount of ...
  3. Earnings

    The amount of ...
  4. Operating Loss - OL

    The net loss ...
  5. Operating Income

    The amount of ...
  6. Operating Margin

    A ratio used to ...
  7. Non-Operating Income

    The portion of ...
  8. Operating Earnings

    Profit earned ...
  9. Operating Revenue

    Income derived ...
  10. Profits Interest

    A monetary right ...

Articles Of Interest

  1. Introduction To Fundamental Analysis

    Learn this easy-to-understand technique of analyzing a company's financial statements and reports.
  2. Advanced Financial Statement Analysis

    Learn what it means to do your homework on a company's performance and reporting practices before investing.
  3. A Look At Corporate Profit Margins

    Take a deeper look at a company's profitability with the help of profit margin ratios.
  4. Profitability Indicator Ratios: Profit Margin Analysis

    This section provides an indepth explanation of gross, operating, pretax and net profit margins.
  5. A Clear Look At EBITDA

    This measure has its benefits, but it can also present earnings through rose-colored glasses.
  6. EBITDA: Challenging The Calculation

    This measure has a bad rap, but it's still a valuable tool when used appropriately.
  7. Analyze Investments Quickly With Ratios

    Make informed decisions about your investments with these easy equations.
  8. Analyzing Operating Margins

    Find out how to put this important component of equity analysis to work for you.
  9. 4 Steps To Picking A Stock

    Narrow down the universe of stocks to find the ones that best suit your needs.
  10. An Introduction To Corporate Valuation Methods

    We look at three widely used valuation methods and figure out how companies justify spending.

comments powered by Disqus
Recommended
Loading, please wait...
Trading Center