Operating Profit: It is a company's profit from its core business operations. It is arrived at after deducting operating expenses from operating revenues. Operating profit does not include interest expenses or other financing costs. Nor does it include income generated outside the normal activities of the company, such as income on investments or foreign currency gains, or extraordinary incomes and other non-operating incomes. Operating income is a measure of profitability based on a company's operations.

• Non-Operating Incomes and Expenses: Non-operating incomes and expenses are those which are not related to the company' core business. Items such as dividend and interest earned on investments, rental income, hire charges, lease rentals, abnormal losses, Profit and sale of assets, profit or loss on sale of investments etc. are considered non operating items.

• Profit Before Interest and Tax (PBIT):  It measures the gross performance of the company. As the term indicates, it is the profit of the company (both operating and non-operating) excluding the interest expenses and taxation expenses. This measure is generally used to measure the performance of the company with reference to its total capital employed.

• Interest:  Interest paid on loans, overdrafts and to creditors is an expense Any amount received in the form of interest is an income. For example, interest received on investment, interest received on deposits, etc. Interest paid on capital should be shown separately on the debit side of the profit and loss account and interest received on drawings should be shown on the credit side of the profit and loss account in the case of sole proprietor and partnership firm.

• Profit Before Tax (PBT): This indicates the profits available after interest but before charging tax. This is to understand the impact of tax which is a compulsory charge on the net profit of the company.

• Profit After Tax (PAT): This is a measure of net profit of the company. It is the net profit earned by the company after deducting all expenses like interest, depreciation and tax. PAT can be fully retained by a company to be used in the business. Dividends, if declared, are paid to the shareholders from this residue.

• Profits Available to Equity Shareholders: This indicates the amount of current profits plus the accumulated profits available to Equity shareholders after appropriating dividends to preference shareholders. These profits can be fully distributable to equity shareholders or fully retained or partly distributed and partly retained according to the company policy.

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