What is the difference between Ebit and Operating profit? - ProProfs Discuss
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What is the difference between Ebit and Operating profit?

Asked by C. Gray, Last updated: May 06, 2020

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J. Pollock

J. Pollock, Science Professor, Los Angeles

Answered May 06, 2020

EBIT or Earnings Before Interest and Tax and Operating profit are two accounting terms that provide certain information about the revenues or incomes of a company. Earnings before interest and tax or Ebit is the net income of a company before interest expense, and tax expense is subtracted. On the other hand, operating profit is the profit from business operations after the operating expenses have been subtracted from the gross profit.

It is from this income that you can easily calculate the amount you will be paying as tax. Through Ebit, you can easily determine the amount you will be having as the actual profit after all the operating expenses have been deducted. It is believed that the higher the Ebit of a business operation, the higher the actual profit after the operating expenses have been deducted. Most of the time, investors will first look at the Ebit of a company before deciding on whether to invest or not.

 

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