What is typically excluded from operating profit?

Operating profit, also referred to as operating income or operating earnings, is a measure of a firm's profitability derived from its core business operations. It generally focuses on revenue generated from sales minus the costs associated with producing the goods or services sold.

Interest expenses are considered a financing cost rather than an operational cost. They arise from loans or credit rather than direct business activities, such as manufacturing or selling goods. Thus, they are excluded from operating profit calculations to give a clearer picture of the business's operational efficiency and profitability. This distinction is important for stakeholders who want to evaluate a company's operational performance without the influence of how it is financed.

In contrast, cost of goods sold, sales revenue, and salaries and wages are integral to determining operating profit. Cost of goods sold is directly deducted from sales revenue to determine gross profit, while salaries and wages are typically categorized as operating expenses directly related to the production and selling functions of the business.