Operating income / Operating profit

Last updated: 02.03.2016

Operating income is the profit/loss from ordinary operations of the company without:

  • interest expense (i.e. cost of debt)
  • income tax
  • incomes and expenses from non-operational activity (i.e. Non-operating result), which is the result of other than ordinary activities.
  • possibly also profit/loss from discontinued operations (defined in IFRS, other GAAPs may not use this concept)

It's usually EBIT less the income from investments (e.g. dividends). But if the company´s core business is related to investment activity, these incomes can form part of Operating income.

 

Operating income is defined by SEC (US Securities and Exchange Commission), its definition, therefore, has the exact wording. SEC also mentions that Operating income is not directly comparable to EBIT or EBITDA. (19) Therefore, above mentioned comparison with EBIT should be considered only as indicative.

However, in practice, it is unfortunately common that the terms EBIT/PBIT and Operating income are used interchangeably or are considered synonymous.



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