Operating profit – Standard definition in plant accounts: Operating profit for a chemical plant is equal to which of the following?

Introduction / Context:Operating profit isolates the profitability from core operations before financing and tax effects. It is also called EBIT (Earnings/Profit Before Interest and Taxes) and is central to ROI calculations in plant economics.

Given Data / Assumptions:

• Interest expense reflects financing choice, not operating performance.
• Taxes depend on jurisdiction and incentives; they are external to operations.

Concept / Approach:Operating profit = EBIT = revenue − operating costs (including depreciation and amortisation) before subtracting interest and tax. Equivalently, EBIT = net profit + interest + tax.

Step-by-Step Solution:Start from net profit after interest and tax (NPAT).Add back tax and interest to remove financing and statutory effects.Result equals operating profit (EBIT).

Verification / Alternative check:Income statement layout confirms EBIT precedes interest and tax lines; reconciling from NPAT by adding interest and tax is standard.

Why Other Options Are Wrong:

• (b) PAT + depreciation is closer to a cash proxy, not operating profit.
• (c) Net profit + tax omits interest; still not EBIT.
• (d) Profit after tax is already downstream of interest and tax.

Common Pitfalls:Confusing EBITDA with EBIT; EBITDA also adds back depreciation and amortisation.

Final Answer:Profit before interest and tax (i.e., net profit + interest + tax)