Learning Materials For Accounting, Management , Finance And Economics.

Sunday, April 11, 2010

Difference Between Net Profit And Funds From Operation

Following are the differences between net profit and funds from operation:

1. Meaning

Net Profit: Net profit is the difference of total revenues and total expenses and losses which include both operating and non-operating items.
Funds From Operation: Funds from operation excludes both non-operating incomes and non-operating losses/expenses.

2. Objective

Net Profit: Net profit represents the operating result of a business.
Funds From Operation: Funds from operation represents the flow of working capital from the operating activities.

3. Determination

Net Profit: Net profit is determined on the basis of nominal accounts.
Funds From Operation: Funds from operation is determined on the basis of profit and loss account and balance sheet.

4. Calculation

Net Profit: Both cash and non-cash expenses are deducted while calculating net profit.
Funds From Operation: Non-cash items are not related to funds from operation.