Which term describes the profit earned from a company's core business operations?

The term that describes the profit earned from a company's core business operations is operating profit. Operating profit, also known as operating income, measures the efficiency of the company in generating profits from its main business activities, excluding expenses related to non-operating activities such as interest and taxes. This figure is crucial for evaluating a company’s operational performance and ability to generate revenue from its primary business functions.

It represents earnings before interest and taxes (EBIT) and is derived from deducting operating expenses, which include costs of goods sold and selling, general, and administrative expenses (SG&A), from total revenue. This focus on core business operations allows stakeholders to assess how well the company is performing in its main area of business without the effects of financing and tax structures.

Other terms, like net income, measure overall profitability after all expenses, which includes non-operating items. Gross profit focuses solely on the revenue remaining after deducting the cost of goods sold, reflecting production efficiency but not operational overhead. Return on equity, on the other hand, is a measure of financial performance that calculates how effectively management is using a company’s assets to create profits for shareholders, incorporating net income but not specifically focusing on operational efficiency. Therefore, operating profit provides the most precise insight into the