What is an Operating Profit?
Operating profit is the amount of return that remains when the operating costs associated with the same period are subtracted. Businesses usually calculate this figure in order to assure that the company is functioning in a manner that is likely to result in a profit when all expenses, including taxes, are paid. By subtracting standard operating costs from the gross profits, it is possible to determine if there is enough remaining to pay taxes, offset any depreciation or amortization that applies, and cover any other expenses related to the ongoing function of the business. Sometimes known as EBIT, or Earnings Before Interest and Tax, the determination of operating profits can be a valuable tool in helping a business make the most of available resources, eliminate waste, and avoid unnecessary purchases as they relate to securing raw materials or stock for the company. When the amount of operating profit decreases from one period to the next, that is a warning sign that something has ch
