Underlying profit vs statutory profit


When companies announce their financial results, they often declare both underlying profit (or loss if negative) and statutory profit (or loss).

What is the difference between these two?

Underlying profit is more important indicator. It shows how the business is performing. This amount is an indication of what business may do year after year if all other parameters remain same.

Statutory profit is calculated by adding one off gains (or losses) to underlying profit. For example, business can make one off sell of some of its assets. This will not happen every year. Thus if we stress more on statutory profit figures, it may not reveal the true picture of how business may perform over long terms. So, most strategic decisions for future path of the business is taken based on underlying profit figures.

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