What is the Difference between Pbit, Nopat, Operating Income, Ebit and Ebitda
In accounting and finance, there are many terms that have various synonyms, but similar meanings. Ultimately, it becomes difficult for an ordinary person to understand these similar meaning terms and he remains confuse. Pbit, Nopat, Operating Income, Ebit and Ebitda are the terms that have very close meanings or even some are synonyms of each others. To make these financial terms clear to everyone in simple wordings and to show the difference between the, here is some description.
PBIT
PBIT or “Profit Before Interest and Taxes” that is also called OPBIT (Operating Profit Before Interest and Taxes) is a synonym term of EBIT. It simply means that profit that you get after selling the goods minus the purchasing cost of goods as well as interest and taxes.
NOPAT
NOPAT is the abbreviation of “Net Operating Profit After Tax”. It simply means that operating profit which the investors and shareholders get after paying the tax. The formula for NOPAT is as; NOPAT = Operating Profit x (1 – Tax Rate).
Operating Income
The simple definition of Operating Income is that, it is the income that a company earns in the form of operating revenue but after excluding operating expenses. The formula for Operating Income is as; Operating Income = Operating Revenue – Operating Expenses
EBIT
EBIT or “Earning Before Interest and Taxes” is simply that profit that a company earns after selling the goods but by excluding income tax and interest. The formula for EBIT is as;
EBIT = Revenue – Operating Expenses + Non-Operating Income
EBITDA
EBITDA is nothing, but an estimation multiple that is used for measurement of a company’s overall value. It is an interchangeable term with P/E ratio that is extensively used to estimate the company’s market value.
Pbit vs Nopat vs Operating Income vs Ebit vs Ebitda
PBIT and EBIT are just interchangeable financial terms and used as synonyms for each other. Both terms mean that operating profit that a company earns without included income tax and interest. The difference between EBIT and NOPAT is only that, NOPAT is the profit that only excludes tax not interest. Operating Income is very near term to EBIT, but having some difference as well. The difference is only that, in case of EBIT there is zero non-operating income. On the other hand, EBITDA is a multiple for evaluation of market value of a company just like P/E ratio.
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