What is mean by Operating Profit

Operating profit is also called as EBIT (earnings before interest and taxes).

To determine operating profit, operating cost is subtracted from gross profit.

Operating profit is a significant number for managers because it reflects revenue and expenses that they can control.

Operating profit is the profitability of the business, before taking into account interest and taxes.

Example:

In this sample balance statement, you can see that operating profit is similar to the concept before income before interest and tax.

It just depends on which label the company uses for this similar concept.

Operating Profit:

Therefore operating profit, or EBIT, is a good thing about how well a company is being managed.

It is closely watched by all stockholders as it measures both the overall demand for the company's products or services (sales) and the company's efficiency in delivering those products or services (costs).

Operating Profit - Gross profit minus depreciation and amortization including operating expenses or SG&A - is also known by the EBIT.

EBIT stands for Earnings Before Interest and Taxes. (earnings are another name for profit.) What has not yet been deducted from revenue is interest and taxes.

Because operating profit is the profit that a business earns from the business in which it operates. Tax is really nothing about how well you are running your company.

And interest expense depends on whether the company is financed with debt or equity. But nothing is said about the company's financial structure how well it does from an operational standpoint.