Operating Profit

Operating profit—often called operating income—represents the earnings a company generates from its primary business operations. It is derived by deducting operating expenses, such as administrative costs, selling-related expenses, depreciation, and other routine business expenditures, from the company’s gross profit. Items like interest, taxes, investment returns, and unusual gains or losses are excluded, allowing operating profit to reflect the efficiency of everyday operations. When gross profit exceeds operating expenses, the firm reports a positive operating profit; when expenses are higher, it results in an operating loss, suggesting that core activities are not covering their costs.

Example: If a company reports a gross profit of ₹20,00,000 and its operating expenses amount to ₹15,00,000, the operating profit is ₹5,00,000. If those expenses rise to ₹25,00,000, the firm instead incurs an operating loss of ₹5,00,000.