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Simple English definitions for legal terms
operating profit
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A quick definition of operating profit:
Operating profit is the money a business makes after subtracting all the costs of running the business, like paying employees and buying supplies. It doesn't include money made from things like investments or loans. It's important because it shows how well a business is doing at making money from its main activities. Other types of profit include gross profit, which is the money made from sales minus the cost of the goods sold, and net profit, which is the money made from sales minus all expenses.
A more thorough explanation:
Definition: Operating profit is the amount of money a company makes from its operations after deducting all the expenses related to those operations. It does not include any non-operating income or expenses, such as interest payments.
Example: A company sells $100,000 worth of products and incurs $70,000 in operating expenses, such as salaries, rent, and utilities. Its operating profit would be $30,000 ($100,000 - $70,000).
This example illustrates how operating profit is calculated by subtracting all the expenses related to a company's operations from its revenue. It gives an idea of how much money the company is making from its core business activities.