The middle profit number on a P&L. Operating profit captures how well the core business is performing - before financing decisions, before tax, before any accounting choices about asset depreciation get added back.
Definition
Operating Profit - gross profit minus operating expenses (OPEX). The profit from running the core business, before interest and tax. Also called operating income or EBIT (Earnings Before Interest and Taxes).
Formula
Operating Profit = Gross Profit − Operating Expenses Operating Margin = Operating Profit ÷ Revenue × 100%
Common uses
- Core business assessment - is the underlying business profitable?
- Cross-business comparison - strips out financing differences
- Operating margin tracking - the percentage version, watched over time
Watch out
Operating profit doesn't equal cash. Like all profit numbers, it's an accounting measure - timing of receivables, working capital movements, and non-cash items affect what actually hits the bank.