difference between Operating Profit and Net Profit
Answers
Operating profit is a company's profit after all expenses are taken out except for the cost of debt, taxes, and certain one-off items. Net income is the profit remaining after all costs incurred in the period have been subtracted from revenue generated from sales.
ANSWER :
❒ The difference between Net Profit and Operating Profit are as follows :-
- [1] Meaning :
★ Net profit means the profit which has been earned through the normal operation and activities of the business. Whereas, Operating profit is described as excess of gross profit over operating expenses plus operating incomes.
- [2] Source :
★ Net profit is arrived at by deducting operating as well as non-operating expenses and losses from the total gross profit and non-operating income. On the other hand, the basis criterion in the calculation of the Operating profit is that revenue are earned and expenses are incurred on the normal business activities involving sale and purchase of goods in which the business enterprise deals.
- [3] Formula :
★ For calculation of Net Profit :-
- Net Profit = Operating Profit - Non-operating Expense + Non-operating income.
Or,
- Net Profit = Net Sales + Non-operating Income - (Cost of Goods Sold + Operating Expenses + Non-operating Expenses).
★ For calculation of Operating Profit :-
- Operating Profit = Gross Profit + Operating Incomes - Operating Expenses.
Or,
- Operating Profit = Net Profit + Non-operating Expenses - Non-operating Income.