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Questions
What is an operating profit?
What is Operating Profit? How is it calculated?
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Solution 1
The operating profit is considered to be the profit that is earned by the business from its core business operations. And the calculation of the operating profit thus excludes interest and taxes. The following formula thus determines the operating profit:
Operating profit = Gross profit – Operating expenses – Depreciation – amortization
Solution 2
Operating profit is the profit a firm makes from its core business operations, less any income or expenses from non-operational activities like interest, taxes, and unusual costs. It is a crucial indicator of a company’s efficiency and profitability in key business activities. Operating Profit is calculated as:
Operating Profit = Gross Profit + Operating Income − Operating Expenses
Operating Profit = Revenue from Operations − Cost of Revenue from Operations − Operating Expenses
RELATED QUESTIONS
Calculate the amount of gross profit and operating profit on the basis of the following balances extracted from the books of M/s Rajiv & Sons for the year ended March 31, 2017.
| ₹ | |
| Opening stock | 50,000 |
| Net sales | 11,00,000 |
| Net purchases | 6,00,000 |
| Direct expenses | 60,000 |
| Administration expenses | 45,000 |
| Selling and distribution expenses | 65,000 |
| Loss due to fire | 20,000 |
| Closing stock | 70,000 |
Calculate the amount of gross profit and operating profit on the basis of the following balances extracted from the books of M/s Rajiv & Sons for the year ended March 31, 2017.
| ₹ | |
| Opening stock | 50'000 |
| Net sales | 11,00,000 |
| Net purchase | 6,00,000 |
| Direct expenses | 60,000 |
| Administration expenses | 45,000 |
| Selling and distribution expenses | 65,000 |
| Loss due to fire | 20,000 |
| Closing stock | 70,000 |
