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EBIT = Gross Profit - Operating Expenses.

To get down to Gross Profit you start with Revenue, subtract COGS to get down to your Gross Profit. From Gross Profit you subtract Operating Expenses to get down to Operating Income or EBIT.

EBIT = Operating Income

Since EBIT = Operating Income, I wouldn't think non-operating expenses would be included in there hence the reason why it's called Operating Income. Don't over think it.

EBIT = Operating Income EBIT is generally gross profit - operating expenses, before non-operational items such as other income, interest income, etc. I've also seen EBIT calculated as gross profit - operating expenses - other expenses (excluding interest and taxes). The first definition is mostly widely used though, and that's what I'd stick with for interviews and general purposes

EBIT = Operating Income

other income/expense would be listed below the line (operating income)

EBIT = OPERATING INCOME

end of thread

99% of people them interchangeably. I've been in IB/PE for 4+ years and don't know the difference (if any), and it has never been an issue.

Well, this is from Vault Guide:

"Expenses are the costs incurred by a business over a specified period of time to generate the revenue earned during that same period of time. For example, in order for a manufacturing company to sell a product such as light bulbs, it must buy the materials it needs to make the product, such as glass. These materials are called Costs of Goods Sold. In addition, that same company must pay people to both make and sell the product. The company must also pay salaries to the individuals who operate the business. These are all types of expenses that a company can incur during the normal operations of the business, usually referred to as selling, general and administrative expenses. The net result of these revenue and expenses is referred to as operating income. Operating income is usually referred to as EBIT (Earnings Before Interest and Taxes). From here, companies pay interest on debt and taxes. Any money left after doing so is considered the third source of financing."

I hope this info helps.

literal EBIT (what you would learn in an accounting course) is net income plus taxes plus interest expense, hence it includes (is below) non operating expenses. adjusted EBIT (which is what bankers care about for valuation purposes) is equivalent to operating income and is net income plus taxes plus interest expense plus non operating expenses (usually one-time, non-recurring items).