1. What Is Operating Profit?

Operating profit, also known as operating income, measures a company's profit from its core business operations, excluding income from investments and taxes. It indicates how efficiently a company is generating profits from its primary activities.

2. How Does the Calculator Work?

The calculator uses the operating profit formula:

Where:

• \( \text{Revenue} \) — Total sales or income generated from business operations
• \( \text{COGS} \) — Cost of Goods Sold, direct costs attributable to production
• \( \text{Operating Expenses} \) — Indirect costs of running the business (salaries, rent, utilities, etc.)

Explanation: This calculation shows the profitability of a company's core business operations before accounting for interest and taxes.

3. Importance of Operating Profit Calculation

Details: Operating profit is a key indicator of business health and operational efficiency. It helps investors and managers assess how well the company is performing in its primary market and whether operational costs are being managed effectively.

4. Using the Calculator

Tips: Enter all values in USD. Revenue represents total income, COGS represents direct production costs, and operating expenses include all indirect business expenses. All values must be non-negative numbers.

5. Frequently Asked Questions (FAQ)

Q1: What's the difference between operating profit and net profit?
A: Operating profit focuses on core business operations only, while net profit includes all income and expenses (interest, taxes, extraordinary items).

Q2: Can operating profit be negative?
A: Yes, if operating expenses and COGS exceed revenue, operating profit will be negative, indicating operational inefficiency.

Q3: What is a good operating profit margin?
A: This varies by industry, but generally 15-20% is considered good. Higher margins indicate better operational efficiency.

Q4: How often should operating profit be calculated?
A: Typically calculated quarterly and annually as part of financial reporting, but can be monitored monthly for internal management.

Q5: What expenses are included in operating expenses?
A: Operating expenses include salaries, rent, utilities, marketing, research & development, depreciation, and other general administrative costs.