What is operating profit

Operating profit is the profit a business makes from its core operational activities.

Operating profit, also called trading profit, is located in the company’s income statement together with the gross profit and net income. The income statement shows the relationships between these three and each metric represent profit at different pats of the production and earning process.

The operating profit is a indicator of a company’s profitability and efficiency over a given period, typically a financial year. This reflects the success of the company’s core business operations, before any deductions for interest payments or taxes.

Operating profit is calculated by deducting operating expenses, including the cost of goods sold and day-to-day running costs, from the gross income or turnover achieved through sales.