I was looking WWE’s business operations, then I saw there was a vast discrepancy between operating profit vs net income.
I’ve heard the same thing applies for real estate and stocks.
In: Economics
Operating profit is the money earned from actual operations – the revenue taken in from whatever the business does minus the expenses associated with running that business. A business can get revenue/income from other things besides its actual operations and it can have expenses due to things other than its operations. As an example, let’s say WWE has a large amount of cash in the bank and that cash earns interest of $500K. WWE isn’t in the business of investing cash to earn interest – it’s in the business of professional wrestling and associated marketing and promotion. So that $500K, which is definitely income to WWE, isn’t operating income, it’s investment income. Similarly, WWE might have an expense unrelated to its operations (like settling an SEC lawsuit about manipulating stock pricing) – it’s not an operating expense since it has nothing to do with actual operations, but it is still an expense. Investment income and depreciation of certain assets are frequently non-operating revenue and expense, but it depends on lots of particulars. As a rule, operating profit is useful to inform investors of just how good or bad the company is at doing what it does everyday as its main business.
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