What is Operating Profit?

Profit is often a misunderstood term. Profit is the surplus in money terms that a firm has made after paying all the costs associated with producing and selling that product. It should not be muddled with sales revenue which is the money the firm has received from selling the product.


There are various types of profit that are measured by accountants in the firm's profit & loss account. Operating profit is the profit after both the direct and indirect costs have been paid.

Sales revenue - Cost of goods sold = GROSS PROFIT

Gross Profit - marketing & admin. costs = OPERATING PROFIT

Operating profit is sometimes also known as TRADING PROFIT.