Operating income and EBIT are profit categories that are very similar and they are commonly used as synonyms. However, there is a slight difference. Let’s see a typical income statement of a public company:
| No | Category | Amount (USD) |
| 1 | Sales | 10.000.000 |
| 2 | Costs of goods sold (COGS) | 6.000.000 |
| 3 = 1 – 2 | Gross profit | 4.000.000 |
| 4 | Operating expenses (OPEX) | 1.500.000 |
| 5 = 3 – 4 | Operating profit | 2.500.000 |
| 6 | Financial income (interest income) | 300.000 |
| 7 | Financial expenses (interest expenses) | 200.000 |
| 8 | Other non – operating income | 15.000 |
| 9 | Other non – operating expenses | 12.000 |
| 10 = 5 + 6 – 7 + 8 – 9 | Profit before tax | 2.603.000 |
| 11 | Corporate income tax | 260.300 |
| 12 = 10 – 11 | Net Profit | 2.342.700 |
Operating profit includes only revenue made from operations of the company’s business (primarily sales). Sales are subtracted by costs of goods sold (COGS) and operating expenses (OPEX):
How would you calculate EBIT (Earnings before interest and tax)?
You will use the following formula:
Both EBIT and Operating profit are used as measures of profit made in business operations. However, there is a slight difference, since EBIT includes interest income, other non–operating income, and other non–operating expenses. Therefore, in our example, operating profit is 2.500.000 USD, while EBIT is 2.803.000 USD.
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