How to Calculate Operating Profit

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Operating profit refers to a company's revenues minus its expenses only from operations. An income statement normally will include non-operating gains and losses. Operating profit does not consider any non-operating charges. For example, labor expense is operating, while a winning a lawsuit is non-operating. The difference boils down to which revenues and expenses are from the firm's basic principals of existing.

Things You'll Need

  • Company's income statement
  • Eliminate any non-operating revenues from the firm's income statement. Non-operating gains include items such as interest income and gain on the sale of a business segment.

  • Add together the remaining operating revenues to determine the firm's operating revenue.

  • Eliminate any non-operating expenses. Non-operating expenses include losing a lawsuit, interest expense, or losses from selling a plant or other assets.

  • Add together the remaining operating expenses to determine the firm's total operating expenses.

  • Subtract operating expenses from operating revenues to determine the firm's operating profit.

References

  • Photo Credit calculator image by L. Shat from Fotolia.com
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