What is the Difference Between Operating Profit and Net Profit?

The main difference between operating profit and net profit lies in the costs they consider. Operating profit focuses on the profitability of a company's core operations, while net profit takes into account all revenues and expenses, including non-operating income and expenses.

Here are the key differences between operating profit and net profit:

Calculation: Operating profit is calculated as operating revenue minus the cost of goods sold (COGS) and operating expenses, such as selling, general, and administrative expenses (SG&A). Net profit, on the other hand, is calculated by subtracting all expenses, including interest on loans, income taxes, and other non-operating expenses, from the company's total revenues.
Purpose: Operating profit helps to understand how a company manages its resources and expenses within its core operations. Net profit, or net income, represents the total profit left over after accounting for all deductions, including interest and taxes.
Financial Statements: Operating profit is an important metric found on a company's income statement, which shows the level of profitability after all expenses are taken out except for the cost of taxes and certain one-off items. Net profit is also known as the bottom line, as it shows the profit remaining after all costs incurred in the period have been subtracted.

In summary, operating profit focuses on the profitability of a company's core operations, while net profit considers all revenues and expenses, including non-operating income and expenses. Both metrics are essential for understanding a company's financial health and performance.