What is the difference between operating profit & gross profit?

Question

This is bcos I wanted to know whether depreciation is deducted while arriving at Gross Profit. If so then what is to be deducted to arrive at Operating profit?

Answer 1

Sales - cost of goods sold = Gross profit

Gross profit - operating expenses = Profit from operation

Operating expenses include: salary, employee benefit, rent, office supplies, depreciation, etc.

Answer 2

Gross Profit Vs Operating Profit

Answer 3

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Gross profit is higher than operating profit. Gross profit is simply Sales less cost of sales. Once you get the gross profit you then take away the operating expenses such as admin expenses and distribution costs to leave you with net profit/operating profit. I hope I have helped you make a distinction

Answer 4

Americans call operating profit the gross profit. It can be an academic terminology there. Depreciation is deducted from Revenue minus cogs or cost of goods sold. Then depreciation and then selling and administrative expenses to reach gross profit in USA. In India depreciation is deducted from operating profits. Americans are far advanced than in Indians when it comes to understanding ethical and efficient pracitce of Business. So there method may be more accurate.

Answer 5

GP is = Revenue -Cost of Good sold( Purly Direct Cost + Overheads) Operating Profit = Revenue - all operating expenses or Profit before Interest and Taxes You Can say...operating profit is "Exclusivly profit earned from Business Operations , excluding Other income / interest / Taxes ".

Answer 6

Gross profit margin (GPM)
Operating profit minus interest, or profit after interest but before depreciation and tax. This ratio is of primary importance for banks, non-banking financial companies and financial institutions

Profit margin
The ratio of profit to sales. Several profit margin ratios are used. The two most commonly used are gross profit margin (gross profit divided by sales) and net profit margin (net profit divided by sales).