Definition
(c) Profit generated by the business.
In detail
Operating Profit (OP) is the profit generated from a company's operating activities, equal to revenue minus operating costs, selling expenses, and administrative expenses; this entry uses the convention that excludes investment income and non-operating income and expenses (this differs from Chinese GAAP, where operating profit includes investment income — state which convention is in use when citing a figure). It is a metric for measuring the profitability of a company's core business, unlike net profit, which also includes non-operating items. In financial analysis, operating profit ÷ operating revenue gives the operating margin, and its year-over-year change (in bps) is OMX; OP is also the basis for the shareholder dimension of CVD. Typical output is the operating profit line in the income statement, used for year-over-year analysis.
Example in practice
In a monthly business review, operating profit was 10% below budget. Finance analysis revealed that the main causes were rising raw material prices and increased sales discounts. Management adjusted procurement strategy and tightened discount policies while driving production efficiency improvements. The following month, operating profit recovered, validating the effectiveness of targeted measures.