1. What is Operating Profit?

Operating profit is a financial metric that shows how much profit a company makes from its core business operations, before deducting interest and taxes. It's a key indicator of business efficiency and profitability.

2. How Does the Calculator Work?

The calculator uses the operating profit formula:

Where:

• Revenue — Total income from sales of goods or services
• Operating Expenses — Costs directly related to business operations (salaries, rent, utilities, etc.)

Explanation: The formula subtracts all operating expenses from total revenue to determine the profit generated from core business activities.

3. Importance of Operating Profit

Details: Operating profit is crucial for assessing a company's operational efficiency, comparing performance across periods or competitors, and making investment decisions. It excludes non-operating items to focus on core business performance.

4. Using the Calculator

Tips: Enter revenue and operating expenses in US dollars. Both values must be positive numbers. The calculator will compute the operating profit by subtracting expenses from revenue.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between operating profit and net profit?
A: Operating profit considers only operational costs, while net profit includes all expenses, taxes, and interest.

Q2: Can operating profit be negative?
A: Yes, if operating expenses exceed revenue, indicating the core business is losing money.

Q3: What's a good operating profit margin?
A: Varies by industry, but generally 15-20% is considered healthy for most businesses.

Q4: Does operating profit include depreciation?
A: Yes, depreciation is typically included as an operating expense.

Q5: How often should operating profit be calculated?
A: Businesses typically calculate it quarterly and annually for financial reporting.