Operating Income

Operating profit is similar to EBITDA as it’s used a profitability metric. But, it includes depreciation and amortization.

So Operating Profit = Revenue - COGS - OpEx - D&A

And EBITDA = Revenue - COGS - OpEx

or EBITDA = Operating Profit + D&A

So if we have a company with:

  • Revenue: $200
  • COGS: $50
  • OpEx: $100
  • D&A: $50

Operating Profit = 200 - 50 - 100 - 50 = $0

EBITDA = 200 - 50 - 100 = $50 OR EBITDA = 0 + 50 = $50

In the room

Interviewers use operating income to check whether you actually understand D&A. If you can rattle off that EBITDA equals operating income plus D&A, and explain why that add-back matters, you've answered two questions at once.

Related terms