An accounting measurement of the profits made by an entity from its ongoing core business/ activities (core operations) over a specific period (i.e., reporting period). Operating profit is reported on the face of an entity’s statement of income (SOI) before expenses like interest and taxes. Operating profit is a measure of an entity’s efficiency to control its expenses (cost efficiency) and run its operations effectively (operational effectiveness).

This figure excludes all income from non-core activities like investments. More specifically, operating profit is calculated by subtracting the cost of goods sold (or services rendered), operating expenses, and depreciation and amortization from an entity’s revenues.

Operating profit = revenues – cost of goods sold – operating expenses – depreciation & amortization

Operating profit is also known as EBIT (earnings before interest and taxes).