Funds from Operation

Funds from Operation = Net Sales – Cost of goods sold – Operating Expenses.

Funds from operation means Operating Profit, which is calculated after deducting cost of goods sold and operating expenses from the amount of net sales.

Funds from Operation may also be calculated in the following manner:

    Rs.
  Net Profit (for the current year) XXX
  Add: Non-cash and non-operating items like  
  Depreciation XXX
  Profit transfer to General Reserve/other Reserves XXX
  Profit transfer to Sinking Fund/other Funds XXX
  Provisions made during the year (Except provision on debtors) XXX
  Loss on sale of Investment XXX
  Loss on sale of Fixed Assets XXX
  Proposed Dividend XXX
  Interim Dividend XXX
  Premium on Redemption of Preference Shares/Debentures XXX
  Writing off: XXX
  Goodwill XXX
  Preliminary Expenses XXX
  Discount on issue of shares and debentures XXX
  Patent Right/Copy Right/Trade Marks XXX
  Underwriting Commission XXX
    XXX
  Less: Non-cash and non-operating incomes like  
  Gain on sale of Investment XXX
  Gain on sale of Fixed Assets XXX
  Appreciation XXX
  Rent from Tenants XXX
  Interest/Dividend received XXX
  Refund of Tax XXX
  Excess provision written back etc. XXX
    XXX
Funds From Operation XXX

Q. What is meant by funds from operation? How is it determined ?


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