Following are the differences between net profit and funds from operation:
1. Meaning
Net Profit: Net profit is the difference of 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.
2. Objective
Net Profit: Net profit represents the operating result of a business.
Funds From Operation: Funds from operation represents the flow of working capital from the operating activities.
3. Determination
Net Profit: Net profit is determined on the basis of nominal accounts.
Funds From Operation: Funds from operation is determined on the basis of profit and loss account and balance sheet.
4. Calculation
Net Profit: Both cash and non-cash expenses are deducted while calculating net profit.
Funds From Operation: Non-cash items are not related to funds from operation.
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