Determining Operating Profit

The second line of profit is operating or trading profit, which is a clear measure of a business’s performance after all its operating costs have been deducted. Identify which costs apply to ascertain how successfully a business has been managed.

DK Examine operating costs to gauge management efficiency.
DK Look at trends in certain costs to anticipate any future problems.

Deducting other costs

The second type of costs in the profit and loss account, which are now deducted to determine operating profit, are called selling, ...

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