Just did a sample question, The answer includes nonoperating rev in EBIT… Is that correct?
yes. Operating income calculation can be subjective towards what a companies “core-operations” but yes operating income is a subset of EBIT
Which question? I thought EBIT is operating income…
So,Carlo, did you mean nonoperating income could subjust into EBIT?
Operating income is below COGS and SG&A. Then we have non-operating stuff. And below this EBIT.
We usually assume that there was no non-operating stuff so operating income = EBIT but in fact EBIT has wider definition.
Did you mean actually there are some differences bt operating income and EBIT? And the difference is some nonoperating stuff?
That is what I mean. EBIT is just above interes and taxes. Operating income is just below SG&A and COGS. There can be sth between.
It looks like this:
Revenue -COGS =GP -SG&A =Operating income +non-operating revenue - non-operating expenses =EBIT (the rest you should know:))
there are non-operating income lines for more complex companies for sure… like gains/losses on sale of assets, or extraordinary fees, or costs from structural changes that are outside normal operations, even gains/income from financial assets…
but for the purposes of the exam i believe it is better for us to not get confused by them.