The Operating Profit Formula. The operating profit would be Gross profit Labour expenses General and Administration expenses 270000 43000 57000 170000. Operating income Gross Profit Operating Expenses Depreciation Amortization.
The formula for calculating operating profit is as follows.
Operating Profit Formula Revenue from Core Operations Total Cost of Goods Sold Value Operating Expenses Depreciation Expenses Amortization Expenses. To determine a companys operating profit refer to the income statement published in the companys annual report. Operating Profit Revenue Labourcost of goods soldexpenses incurred in the normal course of business Operating profits are important because it is an indirect measure of efficiency. As you can see in the diagram below the return on equity formula is also a function of a firms return on assets ROA and the amount of financial leverage.