Operating income

CFA Level II
#1

I’m having a rough time differentiating between operating income and ebit. Any clarifications?

#2

Technically they are the same thing, but they can be different if the firm has some non-operating income. i.e. income generated from a defined benefit plan or gains from the disposal of a building. EBIT would then appear below Operating Profit on the Income Statement.

#3

Thank you!

#4

Agreed for the purpose of the exam assume they are the same.

#5

I would definately think that they’re one and the same thing…but. Mock 2010, Q14 Calculates Operating Income as EBIT - Depreciation for some stupid reason.

#6

Don’t see the question but that could be an error. EBIT by definition already is after depreciation. The only reason I could think of is in the context of Real Estate, where even there you really don’t see words like EBIT but more so NOI. NOI is calculated as Sales - Fixed Exp - Var Exp. Depreciation is NOT included in NOI and should not be subtracted from it. However, you might reduce NOI by depreciation when trying to calculate the taxes due since taxex are payable on “EBT”, ie NOI - depreciation - interest.