Question -
Answer -
Operating profit is a profit earned though normal activities of a business. It is the excess of gross profit over operating expenses. In other words, it is the excess of operating revenue over operating cost. It is also termed as earning before interest and tax (EBTI). It does not include incomes and expenses that are not related to main course of the business.
It is calculated by following formulae:
Operating Profit = Gross Profit − Operating Expenses
Or,
Operating Profit = Sales − Operating Cost
Operating Profit = Sales − COGS − Operating Expenses
Operating expenses include office and administrative expenses, selling and distribution expenses, discount, bad debts, etc.