Operating profit: calculation formula

When analyzing the financial results obtained from the sale of company assets, their authenticity is checked. Estimated income is compared with possible costs. In the course of a comprehensive analysis, the actually achieved financial result is compared with the planned one.

Implementation nuances

When deciding to sell the operating system, you need to compare the possible income with the profit that the organization can extract if it continues to operate the funds. If it is established that the implementation is more profitable, then it must be implemented. In addition to gains and losses on the sale, the company may receive non-operating profit. Its value is not related to the direct sale of property, assets, etc.

Non-operating results

They are formed operating profit emergency, off-sale or related losses. The first include:

1. Insurance Compensation.
2. The value of the property remaining after the write-off of assets not suitable for use and not subject to recovery.

Extraordinary expenses arise due to exceptional factors. Among them are natural disasters (floods, fires), industrial accidents, nationalization of property, etc. Operating profit, the calculation formula of which will be given below, is formed from:

1. Revenues from participation in other companies.
2. Interest receivable.
3. Other income.

Analysis: Features

As a rule, non-operating, extraordinary, operating profit of the organization and related expenses are not planned. Therefore, the main method of their assessment is the study of indicators in dynamics. Values ​​obtained in the present and previous periods are subject to comparison.

During the analysis, for each article, the reasons for the emergence of certain indicators are identified, it is established whether appropriate measures to pay debts were taken in a timely manner, persons responsible for missing deadlines, etc. are determined. A study of non-operating results allows us to assess the degree of organization and quality of work of the marketing and financial services compliance with contractual terms.

Operating profit (net)

It is an indicator of the business entity. The net operating profit of an enterprise is calculated by the formula in which the costs from the ordinary operation of the company are deducted from net revenue. The indicator is almost consistent with sales revenue. But one nuance must be taken into account. Operating profit is considered to have the same value as income before tax. However, these indicators have a significant difference. Pre-tax income includes income and expenses that are not related to the core business. If the company has no other revenues and costs, then the net operating profit is equal to them.

Income structure

Operating profit is formed under the influence of:

1. The volume of finished products sold.
2. Assortment and composition of goods.
3. Cost of released products, wholesale and retail prices.

Each of these factors, in turn, consists of various elements. For example, the cost is formed from the cost of salaries to employees, depreciation amounts.

Operating profit: calculation formula

To determine the measure of income, apply the following equation:

OP = GP + OR - OE, in which:

• GP - gross income;
• OR - income;
• OE - costs.

Scheme

Operating profit is determined in stages:

1. Definition of costs. To do this, the cost of paying salaries to employees is added to other administrative costs, business expenses (for advertising, for example).This also includes the total amount of existing debt.
2. Definition of income. They include income from partners, interest on funds placed, payment for property leased out.
3. Calculation gross income. This indicator is defined as the difference between total revenues and the cost of manufactured products.

The obtained values ​​must be substituted in the equation above.

Management

Of particular importance for the effective operation of the enterprise is the competent management of revenue generation. In the course of this work several important tasks are solved. They can be considered as stages of administrative activity:

1. Break-even point determination. In the course of analysis of the company’s work and planning of subsequent activities, such a volume of products sold is calculated that the costs of their production will be reimbursed.
2. Determination of the profitability threshold for a long period. It should be noted here that long-term work is significantly different from short-term work. Therefore, experts believe that it is advisable to distinguish this stage as an independent one. Through the efficient use of materials variable costs on release units of the product decrease over time. However, with an increase in sales volumes, fixed costs increase. This is due to the need to introduce additional equipment and attract more employees.
3. Determining the volume of sales that allows you to get the planned profit. This task can be formulated in the opposite direction: to make an income forecast based on the available sales data.
4. Definition of "margin of safety". It represents the minimum value of sales, allowing you to not incur losses. Safety margin is one of the main pricing factors.
5. Assessment of opportunities to increase operating profit by reducing fixed and variable costs.

findings

Given the foregoing, we can conclude that the management of the revenue generation process is not only aimed at determining the required sales volume of manufactured products. Of no less importance is the search for ways to increase its indicator. You can increase operating profit by various methods. The most popular are effective assortment policies, minimizing costs, improving quality, improving consumer properties of products.