What is Operating Profit?

Operating Profit is the excess of gross profit over operating expenses. Gross profit is the excess of net sales revenue over cost of goods sold. Operating expenses includes office administrative expenses, selling and distribution expenses, cash discount allowed, interest on bill payable etc..

Operating Profit = Net Sales – Operating Cost

= Net sales – (cost of Goods Sold + Administration and Office

Expenses + Selling and Distribution Expenses)

OR

Operating Profit = Net Profit + Non-Operating Expenses – Non-Operating Income