Cleaning EBIT from Operating Profit yields which metric?

Cleaning EBIT from Operating Profit yields which metric?

• A. Ebitda
• B. EBIT
• C. Net Income
• D. Operating Cash Flow

Answer: (B)

EBIT and operating profit are two names for the same figure: earnings from core operations before financing costs and taxes. If you “clean” EBIT from operating profit, you’re not removing any extra items, because they are the same concept. The result remains EBIT. To move away from EBIT, you’d add back depreciation and amortization to reach EBITDA, or you’d move toward Net Income by accounting for interest, taxes, and other non-operating items, or toward Operating Cash Flow which reflects cash generation from operations. Hence, the metric obtained is EBIT.

EBIT and operating profit are two names for the same figure: earnings from core operations before financing costs and taxes. If you “clean” EBIT from operating profit, you’re not removing any extra items, because they are the same concept. The result remains EBIT. To move away from EBIT, you’d add back depreciation and amortization to reach EBITDA, or you’d move toward Net Income by accounting for interest, taxes, and other non-operating items, or toward Operating Cash Flow which reflects cash generation from operations. Hence, the metric obtained is EBIT.