What is Operating Profit?
Operating profit (EBIT) is the profit a business earns from its core operations after deducting cost of goods sold and operating expenses, but before interest and tax.
How It Works
- Start with revenue.
- Subtract COGS to get gross profit.
- Subtract operating expenses to reach operating profit.
Saudi Context
Saudi banks evaluating SME credit, and analysts modeling Tadawul-listed firms, use operating profit as the cleanest proxy for core business performance.
Example
A Saudi retailer reports SAR 500 million revenue, SAR 350 million COGS, and SAR 100 million operating expenses, giving SAR 50 million operating profit.