10 August 2010
Dear Friend, I need one Clarification regarding below mentioned topic. Generally I have noticed in the Books that while calculation Operating Profit , there are two methods : 1.Operating Profit = (Gross Profit + Operating Income) - (Operating Expns ) 2. Operating Profit = (Net Profit + Non-operating Expns & Losses) - (Non-Operating Incomes & Gains ) So, could you please let me know whether I need to consider " Depreciation on Plant & Machinery" as Operating Expns/Losses or Non-Operating Expns/ Losses or not, to calculation correct amount of Operating Profit. And Please let me know is there any difference between "Funds Generated from Business Operations" ( Not Cash Generated from Business Operations ) & Operating Profit. If so, what is that difference. Kindly clarify the same. Many thanks in advance,
10 August 2010
Depreciation on Plant & Machinery is operating expense. Fund flow is the change in working capital hence will be different from Operating Profit.
11 August 2010
Righty answered by Ms. Sukanya. Operating profit means profits which is earned by following the business operation for which business was established. In costing also depreciation on Plant & Mach is part of factory overheads. So depreciation on Plant & Mach should be considered as operating expense.
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