A tool designed to compute a company’s profitability from its core business operations, this digital resource typically requires inputs such as revenue, cost of goods sold (COGS), and operating expenses (selling, general, and administrative expenses). For example, if a business generates $500,000 in revenue, incurs $200,000 in COGS, and $150,000 in operating expenses, the tool would calculate an operating profit of $150,000.
This figure represents the profit generated before interest and taxes are deducted and serves as a key performance indicator for evaluating a company’s operational efficiency. Analyzing this metric allows businesses to identify areas for cost optimization, assess pricing strategies, and benchmark performance against competitors. Historically, such calculations were performed manually, but advancements in technology have led to automated solutions offering faster and more accurate results, contributing to more informed decision-making.
