Operating Profit

Posted in Finance, Accounting and Economics Terms, Total Reads: 182
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Definition: Operating Profit

Operating profit of a firm is the income generated by the firm from its operations .In other words, Operating profit is the revenue less operating expense. Operating expense include Cost of goods sold, administrative expense and other day to days expense incurred by the firm in the production of goods produced

 

Formula:

Operating Profit= Revenue – Operating Expense

= Revenue – (COGS + Administrative Expense + Miscellaneous Expense)

 

Operating profit is the indicator of the firm ability to pay to its creditors in case the company’s assets are sold off. Operating profit is also called as Earnings before Interest and Taxes which mean Interest and liabilities are included in operating income.

 

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