Practicing Success

Target Exam

CUET

Subject

Accountancy

Chapter

Accounting Ratios

Question:

What is the difference between Revenue from Operations and Operating Profit?

Options:

Gross Profit

Operating Profit

Operating Cost

Net Profit before Tax

Correct Answer:

Operating Cost

Explanation:

Operating cost refers to the total expenses incurred by a company to maintain and run its regular business operations. It includes all the costs directly related to producing and selling goods or services. Operating expenses may include costs like raw materials, labor, rent, utilities, marketing, and other day-to-day expenses.
The correct relationship is: Operating Profit = Revenue from Operations - Operating Cost
Operating profit is the result of subtracting operating expenses (or operating cost) from revenue from operations. This figure represents the profitability of the company's core business activities before considering interest, taxes, and non-operating items. It provides valuable insight into the company's operational efficiency and profitability from its regular business operations.