Why is it important to assess operating profit?
A)Operating profit represents the firm's profits after consideration of all revenues, expenses and comprehensive income.
B)The figure for operating profit provides a basis for assessing the success of the firm apart from its financing and investing activities and separate from tax considerations.
C)Operating profit represents the firm's profits after consideration of all revenues and expenses.
D)Operating profit represents the firm's profits after consideration of all revenues and expenses, except for taxes.

Question

Quizplus · Accepted Answer

Operating profit is important to assess because it shows the company's success in generating profits from its core business activities, without considering any financing or investing activities, and without tax considerations. It gives a clear indication of the company's operating efficiency and profitability. Option A includes comprehensive income, which is not necessarily part of operating profit. Option C is a partial definition of operating profit, as taxes are also considered in arriving at the final profit figure. Option D is incorrect as operating profit does include consideration of all revenues and expenses, including taxes.

Why Is It Important to Assess Operating Profit