Learn How To Find EBIT / Operating Profit Margin.
Operating Income is defined as the income of an organization based on the business operations. The income or profit excludes operating expenses such as a cost of goods, wages, and depreciation. Operating income is also called Earnings Before Interest and Taxes (EBIT). It is also referred to as operating profit or recurring profit.
Let us learn here how to calculate operating income of an organization with simple example.
EBIT Calculation for an organization can be done using the below formula.
Operating Income = Gross Income - Operating Expenses - Depreciation - Amortization
Step 1:Consider the gross income of an organization is $1,000,000, while the operating expenses is $500,000, depreciation is $250,000 and amortization values as $50,000.
Gross Income = $1,000,000
Operating Expenses = $500,000
Depreciation = $250,000
Amortization = $50,000
Step 2:EBIT / Operating Profit Margin Calculation
Applying the values in the formula,
Operating Income (EBIT) = Gross Income - Operating Expenses - Depreciation - Amortization
= $1,000,000 - $500,000 - $250,000 - $50,000
Thus, the Earnings Before Interest and Tax of the organization is $200,000