What is Operating Profit?
Operating profit is the amount of profit a business makes before paying tax, interest and any other one off costs or income unrelated to day to day business operations.
What Does Operating Profit Show?
Operating profit is the amount of profit left over after paying for production costs and overheads such as rent or salaries.
Operating profit gives an indication of the efficiency of a business excluding factors is cannot control such as tax.
An operating loss can show that a business is simply not viable because it is unable to generate enough revenue to cover its costs. Alternatively it could indicate a poorly run business which is wasting money on overheads or delivering its products inefficiently.
Operating profit is also known as EBIT (Earnings Before Interest and Tax).
