How Do You Calculate Net Operating Profit?
Net operating profit represents the profitability of a company after accounting for cost of goods sold and operating expenses. Operating profit is an important measurement because it allows investors to determine how good a job management is doing at growing a company’s profitability. Operating profit does not account for expenses such as interest and taxes, so it is a true measure of the profits of a company’s underlying operations, and does not depend on capital structure or one-time expenses. For this reason, operating profit is one of the key metrics that investors use in evaluating a business. Determine a company’s revenue, either by taking it off of the profit and loss statement or by multiplying the quantity of goods sold by the average selling price. If you have the company’s annual report, revenue will be the first line on the profit and loss statement. Subtract any discounts, rebates or product returns to get a net revenue figure. Subtract the company’s cost of goods sold fro
