What Is Net Operating Profit?
Net operating profit refers to the amount of money that a company has earned after the cost of goods sold and operating expenses have been deducted. This is used to see whether a company is making more than it spends or is operating at a loss. Net profit also is referred to as “the bottom line,” because it is usually shown at the bottom of an income statement. Net operating profit is important because it measures a company’s profitability and how well its management is growing that profitability. Profitability simply refers to the company’s ability to earn a profit. Expenses outside the company’s own operations, such as investments in other firms and start-up costs, are not included in the equation for calculating net profit. This is so that it can serve as a true measure of a company’s long-term profitability without deducting one-time expenses.
