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When net profit is Rs. 44,000 and profit on sale of a fixed asset is Rs. 4,000, what is the fund from operations?

When net profit is Rs. 44,000 and profit on sale of a fixed asset is Rs. 4,000, what is the fund from operations? Correct Answer Rs. 40,000

Net Profit: Net profit is the difference in 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.

Non-operating income refers to the part of a company’s income that is not attributable to its core business operations. It is a category in a multi-step income statement. Dividend incomes, gains or losses from foreign exchange, as well as sales of assets, a write-down of assets, interest incomes, and expenses are all examples of non-operating income items.

Formula:

Fund from operation = Net Profit - Non-operating income(sale of the fixed asset)

= Rs. 44,000 - Rs. 4,000

= Rs. 40,000

Therefore, When net profit is Rs. 44,000 and profit on the sale of a fixed asset is Rs. 4,000, the fund from operations will be Rs. 40,000.

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