Operating profit
Also called: EBIT, earnings before interest and tax, operating income
Profit from a company's operations after all operating costs, including depreciation, but before interest, other income and tax.
Operating profit shows what the business itself earns. It excludes other income, such as interest on cash, and finance costs, so it is not affected by how the company is funded.
Indian income statements rarely print it; you calculate it as revenue minus operating expenses and depreciation and amortisation.
Example
Revenue of ₹1,200 crore, operating costs of ₹980 crore and depreciation of ₹50 crore give operating profit of ₹170 crore.
Learn more in these lessons
- Operating profit, EBITDA and net profitWhat is the difference between EBITDA, operating profit and net profit?
- Operating leverageWhy do some companies' profits swing much more than their sales?
- Return on capital employed (ROCE)What does ROCE measure, and how is it different from ROE?
- Interest coverageHow can you tell whether a company can afford its interest payments?
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