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What Is Operating Profit?

Operating profit is a measure of the profit generated by a company's core business activities.

Operating Profit = Gross Profit − Selling, General and Administrative Expenses

What the figure represents

Operating profit is calculated by deducting cost of sales and selling, general and administrative expenses (such as personnel costs, advertising, and rent) from revenue. It is a representative measure of how much earning power a company has from its core business.

Points to watch when reading it

Looking at operating profit as a percentage of revenue (operating margin) alongside the raw figure makes it easier to compare profitability with peers and to track changes in earning power over multiple periods.

This article is provided for general informational purposes only and does not recommend or solicit the purchase or sale of any specific investment method or security. Final investment decisions are your own responsibility.

Frequently Asked Questions

How does operating profit differ from ordinary profit?
Operating profit reflects profit generated solely from the core business, while ordinary profit also adjusts for non-operating items such as interest received and interest paid. Comparing the two can show whether the core business or non-core factors are having a greater effect on overall profit.
What does an operating loss (negative operating profit) mean?
It means revenue from the core business alone is not covering the costs of running that business (cost of sales and SG&A expenses). This can sometimes be due to a temporary factor, so it is generally advisable to check the trend over several periods together with the nature of the business.

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