Similarities and differences between operating profit and EBIT

Operating profit is based on operating income minus operating costs, business taxes and surcharges, sales expenses, management expenses, financial expenses, asset impairment losses, plus fair value change gains (minus fair value change losses) and investment income to calculate the EBIT refers to the profit of the enterprise before excluding financial expenses, if the enterprise has a large number of bank deposits, financial expenses will be negative, it offsets operating expenses, but not operating income, so when calculating the actual operating profit of the enterprise, this item should be excluded.

In layman's terms, it is a profit without deducting interest or income tax, that is, profit before income tax without considering interest, which can also be called profit before interest and tax. Earnings before interest and taxes, as the name suggests, refers to the profit before interest and income taxes are paid.

The difference is the issue of interest deduction and tax deduction.

Operating profit: If you look at the income statement, there is an item called operating profit, which is to deduct non-recurring gains and losses (non-operating income and expenditure). EBIT is net profit plus income tax, i.e. total profit, including non-recurring gains and losses.

EBIT = net profit + income tax + financial expenses, financial expenses are equivalent to interest, but in practice, financial expenses are not only interest. Therefore, EBIT = net profit + income tax + financial expenses is inaccurate, and it is not very accurate to say that operating profit is EBIT.

The difference between the two is that the "interest" is considered, and the pre-tax operating profit considers the interest expense in the broad sense, while the EBIT takes into account the interest expense in the narrow sense, and there is a difference between the two. From the perspective of the meaning, earnings before interest and taxes (EBIT) is a concept derived from the bottom up of the income statement, net profit plus tax is profit before tax, and profit before tax plus interest is EBIT;

Operating income is a concept that is pushed down from the top of the income statement, operating income minus operating costs, and then subtracting period expenses or operating expenses is operating income.

Under operating income and EBIT, there is also net other income and expenses, which are called non-core income, which includes other operating income expenses, one-time income expenses, one-time legal fees, restructuring costs, and equity awards.

How EBIT is calculated:

1. EBIT = net profit of the enterprise + interest expense paid by the enterprise + income tax paid by the enterprise;

2. Or, EBIT = marginal contribution - fixed operating costs = total sales revenue - total variable costs - fixed operating costs;

3. EBIT is mainly used to calculate;

4. Regardless of the operating profit of the enterprise, the interest on debt and the dividends on preferred shares are fixed. When EBIT increases, the fixed finance costs per dollar of surplus are relatively reduced, which can lead to more earnings for common shareholders.

Yes. EBIT includes interest and income tax, EBIT = gross profit + interest.

EBIT is generally said to be profit without deducting interest and income tax, that is, profit before income tax without considering interest, which can also be called profit before interest and tax. Earnings before interest and taxes, as the name suggests, refers to profits before interest and income taxes are not paid.

Pre-tax profit refers to the profit before the payment of income tax, that is, the profit of the enterprise's operating income after deducting costs and expenses and turnover tax, which is called pre-tax profit, and the enterprise income tax is paid on this basis.

EBIT = Gross Profit + "Interest Expense" in the Traditional Income Statement

Pre-tax operating profit = total profit + "interest expense" in the income statement for management purposes

"Interest expense" in the income statement for management = "interest expense" in the traditional income statement - investment income on financial assets - profit or loss on fair value change of financial assets + impairment loss on financial assets.

Pre-tax operating profit = EBIT - investment income on financial assets - gain or loss on fair value change of financial assets + impairment loss on financial assets.

The difference between gross profit and EBIT: Gross profit does not include interest expenses paid by the company, while EBIT includes interest expenses paid by the company. EBIT can also be referred to as EBIT, which is commonly referred to as profit without deducting interest or income tax, that is, profit before income tax without considering interest.

Total profit refers to the final financial results achieved by an enterprise through production and business activities in a certain period of time.

It's not quite the same. 1. EBIT is a profit without deducting interest or income tax, that is, the profit before paying income tax without considering interest, which can also be called profit before interest and tax. Earnings before interest and taxes, as the name suggests, refers to the profit before interest and income tax are paid.

2. The total profit is the surplus of a company after deducting discounts, cost consumption and business tax in its operating income, which is what people usually call profit, and the relationship between it and operating income is: total profit = operating profit + non-operating income - non-operating expenses.

3. The relationship between total profit and EBIT is that the former includes the interest expense paid by the enterprise, and the latter includes the interest expense paid by the enterprise.

Relationships are described below

The relationship between EBIT and net profit is that net profit includes EBIT. Net profit = EBIT - Interest expense - Income tax expense = Total profit (1 - income tax rate).

EBIT = Sales Revenue - Variable Costs - Fixed Costs = Net Profit (1 - Income Tax Rate) + Interest Expense = Net Profit + Income Tax Expense + Interest Expense = Total Profit + Interest Expense, Total Profit = EBIT - Interest.

EBIT = total profit + interest in financial expenses;

Net profit = total profit - corporate income tax calculated on the basis of total profit.

For project cash flows, operating profit and EBIT are basically equal because interest expense and non-operating income and expenditure are not considered, and net profit (excluding interest expense) = EBIT * (1 - income tax rate).

Total profit = operating income + net investment income + non-operating income - operating costs - business taxes and surcharges - operating expenses - administrative expenses - financial expenses - non-operating expenses.

The second is correct.

Net Profit = Gross Profit * (1 - Income Tax Rate).

Interest is deducted when calculating profits.

EBIT refers to the profit of the enterprise without deducting interest or income tax, and the calculation method of profit before interest and tax travel segment is as follows: EBIT = sales revenue - variable cost - fixed cost = net profit (1 - income tax rate) + interest expense = net profit + income tax expense + interest expense = total profit + interest expense. Operating profit is equal to the profit from the main business plus the profit from other businesses, minus operating expenses, administrative expenses and financial expenses. Operating profit = main business income - main business cost - main business tax and surcharge + other business income - other business expenses - operating (sales - financial expenses.