Gross operating profit

Definition: Gross operating profit

Gross operating profit is also called gross operating surplus. It corresponds to the difference between the turnover and the total expenses related to the operation.

What is the purpose of gross operating profit?

This indicator shows the company's sales (excluding taxes) and related expenses. It is a good indicator of a company's economic profitability. Gross operating profit is calculated from the income statement, and is often presented in an appendix called the "Intermediate Operating Balance".

How to calculate and improve your gross operating profit? 

This indicator is calculated as follows: turnover (excl. tax) - purchase of goods (excl. tax) - external charges (excl. tax) - taxes - payroll - operating subsidies. If the EBITDA is negative, it means that the company's activity is not profitable.

In order to increase the gross profit, several means can be implemented. First of all, you can try to improve your commercial margin (sales price, purchase,..). A negative EBITDA can also be due to excessive expenses within the company, such as rent. Finally, the wage bill can be too important compared to the activity of the company: it will thus unfortunately be necessary to think of reducing the social charges like the wages.

Want to know more about the use of gross operating income invaluation of a companyDo not hesitate to contact one of our experts: contact a XVAL consultant.