What is the difference between Ebit and Operating profit? - ProProfs Discuss
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What is the difference between Ebit and Operating profit?

Asked by C. Gray, Last updated: Jun 10, 2022

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2 Answers

C. Bernthal

C. Bernthal

Its kind of my job to give answers

C. Bernthal
C. Bernthal, Teacher, MA, P.hD, Seattle

Answered Oct 08, 2020

Some people assume that EBIT is the same as operating income probably because they are closely used together. When you say EBIT, this is known to be the net income that you will have before you would be removing interest and income tax expenses.

When you say operating income, you are referring to the profit minus the expenses of operating the different things that are related to business. Even expenses that are related to the business will be under operating income. Some examples of expenses that you would acquire in business are depreciation and SG&A. You can use specific formulas in order to compute for these.

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J. Pollock

J. Pollock

J. Pollock
J. Pollock, Science Professor, Los Angeles

Answered May 06, 2020

EBIT or Earnings Before Interest and Tax and Operating profit are two accounting terms that provide certain information about the revenues or incomes of a company. Earnings before interest and tax or Ebit is the net income of a company before interest expense, and tax expense is subtracted. On the other hand, operating profit is the profit from business operations after the operating expenses have been subtracted from the gross profit.

It is from this income that you can easily calculate the amount you will be paying as tax. Through Ebit, you can easily determine the amount you will be having as the actual profit after all the operating expenses have been deducted. It is believed that the higher the Ebit of a business operation, the higher the actual profit after the operating expenses have been deducted. Most of the time, investors will first look at the Ebit of a company before deciding on whether to invest or not.

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