Rectify:
Q1. Write the formula of calculating operating profit when net profit is given.
Answers
Operating Profit = Net Profit + Interest Expenses + Taxes.
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Answer:
An operating profit is the total income earned from the operations of a company before taxes, interest charges or other expenses are calculated. This number is typically calculated as a percentage to show the amount of revenue brought in from operations versus the money spent to keep the operations running. This formula can be used to determine the profitability potential of a company when all extraneous costs are factored out.
The operating profit of a company is often put on the income statement as a subtotal. It's important to note that this calculation is not necessarily equal to the cash flow of a business; rather, it's a snapshot of the profit-making potential of a company before expenses are accounted for.
Additionally, operating profit can be used to compare one business to other similar companies in the same industry. This formula can highlight the most profitable companies and help to point out why some companies are succeeding and others are not.