What is a company’s Operating Profit?
Operating Profit is a company’s profits after cost of sales, depreciation, amortization, research and development costs and any other operating expense. However Operating Profit does not factor in taxes or interest expenses on the company’s debt.
Operating Profit is also known as the company’s “EBIT” (Earnings Before Interest and Taxes) or the company’s operating income.
Or can be simply calculated:
Operating Profit = Revenue – Operating Expenses
Notice that it is different than the “bottom line” or Net Income, which does factor in taxes and interest expenses.
Example below from Intel’s (INTC) 2012 2nd quarter earnings, which can be found here:
(click to enlarge)
Operating Profit is used to help compare a company’s ability to create a profit without considering capital structure or tax rates.
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