2025 · Q83
Which one of the following is correct?
General Accounting Principles, Auditing and InsuranceCash flow analysis
- AOperating profit = Net profit - Non-operating expenses - Non-operating incomes
- BOperating profit = Net profit + Non-operating expenses + Non-operating incomes
- COperating profit = Net profit - Non-operating expenses + Non-operating incomes
- DOperating profit = Net profit + Non-operating expenses - Non-operating incomes
Explanation
Operating profit is derived from net profit by adding back non-operating expenses and deducting non-operating incomes: Operating profit = Net profit + Non-operating expenses - Non-operating incomes. Non-operating expenses were debited to the P&L but are not operating costs, so they are added back; non-operating incomes were credited but are not operating revenues, so they are stripped out. The other formulae reverse these adjustments.