Operating profit
In one sentenceGross profit minus operating expenses such as administrative and selling expenses, measuring the profit of the main activity before financing, Zakat and other items.
Simply put
Operating profit isolates the performance of the business itself: do selling and management produce a profit? That is why it is not affected by how the business is financed or by a one-off gain from selling an asset.
It is used to compare branches or businesses that are financed differently, and EBITDA comes close to it after adding back depreciation and amortization.
Worked example
An auto parts store has a gross profit of 240,000 SAR, general and administrative expenses of 90,000 SAR, and selling and distribution expenses of 60,000 SAR.
Gross profit240,000
− General and administrative expenses(90,000)
− Selling and distribution expenses(60,000)
Operating profit = 240,000 − 90,000 − 60,00090,000 SAR
Formula: Gross profit − operating expenses
Don't confuse it with
Earnings before interest, taxes, depreciation and amortizationEBITDA adds depreciation and amortization back to profit, while operating profit deducts them.
in FullScreen ERP
Cost centers in the system show the profitability of each branch, project or department. General accounts