Nonoperating rev/exp included in EBIT?

CFA Level II
#1

Just did a sample question, The answer includes nonoperating rev in EBIT… Is that correct?

#2

yes. Operating income calculation can be subjective towards what a companies “core-operations” but yes operating income is a subset of EBIT

#3

Which question? I thought EBIT is operating income…

#4

So,Carlo, did you mean nonoperating income could subjust into EBIT?

#5

Operating income is below COGS and SG&A. Then we have non-operating stuff. And below this EBIT.

We usually assume that there was no non-operating stuff so operating income = EBIT but in fact EBIT has wider definition.

#6

Did you mean actually there are some differences bt operating income and EBIT? And the difference is some nonoperating stuff?

#7

That is what I mean. EBIT is just above interes and taxes. Operating income is just below SG&A and COGS. There can be sth between.

It looks like this:

Revenue -COGS =GP -SG&A =Operating income +non-operating revenue - non-operating expenses =EBIT (the rest you should know:))

#8

there are non-operating income lines for more complex companies for sure… like gains/losses on sale of assets, or extraordinary fees, or costs from structural changes that are outside normal operations, even gains/income from financial assets…

but for the purposes of the exam i believe it is better for us to not get confused by them.