Operating profit is a key financial metric in business strategy as it provides an indication of a company's profitability from its core business operations, before interest and taxes. It's calculated by subtracting all variable and fixed costs of production, including overheads, from a company's gross income. This metric is crucial as it reflects the profits made from the company's primary business activities. It can be used to compare companies within the same industry, and it's a good indicator of business efficiency and operational management. Other key financial metrics like net profit, gross profit, and EBITDA are related but they take into account different factors. For example, net profit also includes the effects of interest and taxes, while gross profit only considers the cost of goods sold.
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