Operating Profit vs Net Profit Top 4 Differences with Infographics
Since net income denotes the profitability of the firm, it is used in calculating parameters like EPS, return on equity, and return on assets. Shareholders are mainly interested in these ratios, as these will only determine if their investments have been worthwhile. Operating profit serves as a highly accurate indicator of a business's health because it removes all extraneous factors from the calculation. Using the above example in net profit, let us calculate the net profit margin of ABC Retail.In addition to COGS, fixed-cost expenses, such as rent and insurance, and variable expenses, such as shipping and freight, payroll and utilities,...
Continue reading