Operating Profit or Loss

Operating Profit or Loss – Operating profit or loss measures a company’s efficiency and operational productivity by means of an effective comparison between income and expenditure figures from the company’s balance sheet and profit and loss accounts.

It is basically the difference between the revenue generated and the expenses occurring which excludes any income arising from sources other than the regular ones and before any deduction is made. Some of the comparison ratios are operating income against operating expenses, sales to cost of the products that were sold, net profit against gross income and net income to net worth.

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All these comparison ratios are then compared with the company’s past results and also against industry aggregate to check on the present performance. The operating profits generated from a company are often considered as a good measure of the company’s performance. However, one has to look for profits that are recorded after excluding exceptional items, as this proves to be a major impact on company profits.

Edited and Updated 08th March 2014

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