General Q on EBITDA and Operating Income

CFA Level II
#1

Are they the same thing? If so why have two terms for the same thing? e.g. Mock Morning exam YeongSan Securities Q14. Operating Income / Sales shown . EBITDA Interest coverage shown. Both show different working method to get the numerator , but result is the same for the numerator. Is this only this case? Or always that Op Income = EBITDA

#2

Sales - COGS - SGA = Operating Income. Operating Income / Sales = Gross Profit Margin And usually Operating Income = EBITDA

#3

Thanks CPK

#4

But in Q 35 of same mock exam , they treat EBIT = Operating Income. So there you go , confusion within one exam! A 35. Time Interest Earned = Operating Income ( EBIT ) / Interest. How would I know to use EBIT here and EBITDA in Q14 ?!!

#5

I’ve always used EBIT as operating income. The only issue is in financial reporting quality, some firms may report nonoperating income as operating income. There is not hard and fast rule here. EBITDA is more an operating cashflow figure than EBIT, and EBIT is more an operating income figure than EBITDA. Use your head, there is no hard and fast rule, but you should be fine my friend.

#6

If you have no depreciation then EBIT=EBITDA=operating income. If there is deprecation, then EBITDA = operating income, and EBIT is EBIT. That’s what I know.

#7

Operating Income and EBIT are used interchangeably in practice…so this surprised me.

#8

In Q 35 , there is deprciation given int the vignette , but they calc Operating Income as EBIT , not as EBITDA contrary to Dreary’s post . I can see at least some people getting it wrong . I know I did.

#9

Stalla has always used operating income and EBIT synonymously. I don’t understand where the confusion is coming from.