Final answer:
Operating profit, also known as Earnings Before Interest and Taxes (EBIT), is the profit a company makes from its core operations, and is calculated by subtracting explicit costs from total revenues, excluding investment income, taxes, and interest expenses.
Step-by-step explanation:
Operating Profit is also called Earnings Before Interest and Taxes (EBIT). This metric is crucial for a firm as it represents the profits a company generates from its operations, after subtracting all explicit costs such as wages, salaries, rent, or materials but before interest and taxes are accounted for. It is an indicator of a company's profitability and efficiency in its core business operations, outside of the influence of financing and tax structures. Calculating operating profit involves taking the total revenues, subtracting the cost of goods sold (COGS) and the day-to-day operating expenses, but it does not include investment income, taxes, or interest expenses.