Operating Profit Calculator

The operating profit calculator works out the profit your business earns from its core trading activity, before interest and tax are taken into account. You enter your revenue, your cost of goods sold, and your operating expenses, and the tool returns your operating profit in dollars. Operating profit, often called EBIT or earnings before interest and tax, strips out financing costs and tax so you can see how well the actual business is performing on its own merits. Cost of goods sold covers the direct costs of what you sell, while operating expenses cover the running costs of the business such as rent, salaries, marketing, utilities, insurance, and depreciation. What it leaves out is interest on loans and income tax, because those depend on how the business is financed and taxed rather than on how well it trades. A New Zealand business owner, manager, lender, or investor can use operating profit to judge the health of the core operation and to compare it fairly with other businesses regardless of their debt levels. To get an accurate figure, make sure all three inputs cover the same period and that operating expenses do not accidentally include interest or tax, which would understate operating profit. Track the figure over time so you can see whether the core business is getting stronger, and pair it with revenue to watch your operating margin. If operating profit is shrinking while sales hold steady, your direct or running costs are likely rising and worth a closer look. All figures are in New Zealand dollars and the result is an estimate to guide decisions, not a substitute for advice from your accountant.

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Revenue ($)

Cost of goods sold ($)

Operating expenses ($)

$80,000

Operating profit

Operating margin16.0%

Operating profit = revenue - COGS - operating expenses. Estimate only, not financial or tax advice.

How it works

Operating profit is revenue minus the cost of goods sold and then minus operating expenses. Operating margin is that operating profit divided by revenue. The defaults use $500,000 revenue, $300,000 COGS, and $120,000 of operating expenses.

Worked example

With revenue of $500,000, COGS of $300,000, and operating expenses of $120,000, operating profit is $500,000 minus $420,000, which is $80,000. Dividing $80,000 by $500,000 gives a 16.0 percent operating margin.

Related calculators

Operating Margin Calculator: operating margin percentage.
Gross Profit Calculator: profit after direct costs.
Net Profit Calculator: bottom line profit.
EBITDA Margin Calculator: margin before D and A.

Frequently asked questions

What is the difference between operating profit and net profit?

Operating profit is revenue less cost of goods sold and operating expenses, before interest and tax. Net profit goes further and also deducts interest and tax. Operating profit isolates how the core business trades.

Is operating profit the same as EBIT?

In most cases yes. EBIT means earnings before interest and tax, which is what operating profit measures. Small differences can arise if a business has one off items outside normal operations.

What should operating expenses include?

Operating expenses are the running costs of the business such as rent, wages, marketing, utilities, insurance, and depreciation. They should not include interest on debt or income tax, which sit below operating profit.