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Other income is added to net operating profit and other expense is subtracted from net operating profit to compute Net Profit Before Income Taxes.
Other Income - Income produced from other than the normal operations of the business. Includes interest, dividends, and gains from the sale of assets.
The data items that you must be able to provide to construct a P & L statement are:
Net Sales
Cost of Goods Sold
Selling and Administrative Expenses
Other Income and Other Expense
We add Other Income to identify the net profit of the entity.
By GP we focus on the main financial operations of the entity and measure the efficiency and productivity of it.
By NP we focus on the financial capability or financial health of the entity in a given period (ie; changes of economic resources and claims from financial performance), therefore, we have to consider all other incomes and expenditures which derives from the ordinary course of business of the entity in a given period.
