If a company has a gross profit of $200,000 and operating expenses of $120,000. What is its Operating profit?

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BlackTom AI · Accepted Answer

To start, we identify the relationship between gross profit and operating profit in basic income statement math.
Option 1: "$80,000". This matches the calculation: Operating profit = Gross profit - Operating expenses = 200,000 - 120,000 = 80,000. This is the correct result.
Option 2: "$320,000". This would imply adding operating expenses to gross profit, which is not how operating profit is computed; it would double-count expenses and misrepresent profitability.
Option 3: "$220,000". This would correspond to subtracting only part of the $200,000 gross profit or misplacing numbers (e.g., 200,000 - 120,000 = 80,000, not 220,000). It ignores the proper subtraction step.
Option 4: "-$80,000". A negative operating profit would require operating expenses to exceed gross profit by 80,000, which is not the case here since 120,000 is less than 200,000. This incorrectly signs the result.
In summary, the correct approach is to subtract operating expenses from gross profit, yielding 80,000, so only Option 1 reflects the accurate operating profit.

VPAB13H3 F LEC01 Final Exam Quiz

If a company has a gross profit of $200,000 and operating expenses of $120,000. What is its Operating profit?

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