How is operating income
calculated?
Sales or service revenues
− Cost of goods sold (COGS)
= Gross profit
− Selling, general, and administrative expenses
= Operating income
© 2019 HOCK international
, How is EBIT calculated?
Operating income
+ Interest and dividend income
+/− Non-operating gains/(losses)
+/− G/L from operations of discontinued Component X
including G/L on disposal of $XXXX (before tax)
= Earnings Before Interest and Taxes (EBIT)
© 2019 HOCK international
, How is EBT calculated?
Earnings Before Interest and Taxes (EBIT)
− Interest expense
= Earnings Before Taxes (EBT)
© 2019 HOCK international
, What is a vertical common-size
financial statement?
A simple vertical common-size financial statement covers
one year’s operating results and expresses each
component as a percentage of a total.
For example, fixed assets will not be stated as a dollar
amount but rather will be stated as a percentage of total
assets. Each expense item will be stated as a percentage
of total revenue.
© 2019 HOCK international
calculated?
Sales or service revenues
− Cost of goods sold (COGS)
= Gross profit
− Selling, general, and administrative expenses
= Operating income
© 2019 HOCK international
, How is EBIT calculated?
Operating income
+ Interest and dividend income
+/− Non-operating gains/(losses)
+/− G/L from operations of discontinued Component X
including G/L on disposal of $XXXX (before tax)
= Earnings Before Interest and Taxes (EBIT)
© 2019 HOCK international
, How is EBT calculated?
Earnings Before Interest and Taxes (EBIT)
− Interest expense
= Earnings Before Taxes (EBT)
© 2019 HOCK international
, What is a vertical common-size
financial statement?
A simple vertical common-size financial statement covers
one year’s operating results and expresses each
component as a percentage of a total.
For example, fixed assets will not be stated as a dollar
amount but rather will be stated as a percentage of total
assets. Each expense item will be stated as a percentage
of total revenue.
© 2019 HOCK international
