Formation of operating income
Operational profit includes a large number of transactions that are performed at different stages of the cash funds received from the sale of goods, services, works, and ensure receipt of net profit. In this regard, the main purpose of profit is to optimize cash flows and costs, identify the reserves and their mobilization.
Profit (loss) from operating activities is calculated in several stages.
• The first stage is determined by net income from sales by adjusting revenues from sales to the amount of indirect taxes and other deductions from income.
• In the second stage the result is adjusted for cost of sales. As a result of calculated gross gain or loss from sales.
• In the third stage, the gross profit increases (decreases) in the amount of other operating income (loss), which is derived from the sale of other current assets (excluding financial investments), operating lease assets, operating exchange differences, receiving fines, penalties, etc.
• The fourth step is determined by income (loss) from operating activities as the difference between the results obtained in the third stage, the size and administrative expenses and cost of sales.
Formation of income from operations is influenced by both external and internal factors.
The main ways of increasing operating profit is to increase production, reduce cost of sales, intelligent assortment policy, improve product quality.