ITPEC IP October 2025 Question 71
ITPEC IP October 2025 — Question 71 of 100
Operating profit equals gross profit minus selling, general, and administrative expenses — this measures profit generated by the company's main business operations.
Gross profit is sales minus cost of sales. Deducting the operating expenses needed to sell products and administer the business produces operating profit. Financing results, extraordinary items, and taxes are applied at later stages.
Answer (b)
Why not others:
- (a) calculates gross profit
- (c) adjusts ordinary profit for extraordinary gains and losses to obtain profit before tax
- (d) subtracts taxes from profit before tax to obtain net profit
Key rule: Follow the income-statement sequence: sales, gross profit, operating profit, ordinary profit, profit before tax, and net profit.
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