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Know Gross vs Operating vs Net Profit & NOPAT vs EBITDA – Key Differences

Know Gross vs Operating vs Net Profit & NOPAT vs EBITDA – Key Differences

Gross profit or gross income is the profit earned by an enterprise after deducting all the costs incurred for manufacturing and selling its products or services

Gross profit or gross income is the profit earned by an enterprise after deducting all the costs incurred for manufacturing and selling its products or services

Operating profit is the net income of a business earned from its core operations

Operating profit is the net income of a business earned from its core operations

Operating expenses are salaries, sales and marketing costs, rent, accounting and legal fees, utilities, office supplies, etc.

Operating expenses are salaries, sales and marketing costs, rent, accounting and legal fees, utilities, office supplies, etc.

To calculate operating profit, operating expenses and day-to-day costs such as depreciation and amortisation are subtracted from gross profit

To calculate operating profit, operating expenses and day-to-day costs such as depreciation and amortisation are subtracted from gross profit

Net profit also called profit after tax (PAT), net income, net earnings, and bottom line as the name suggests is the money earned by a company after deducting all its expenses, interest and tax

Net profit also called profit after tax (PAT), net income, net earnings, and bottom line as the name suggests is the money earned by a company after deducting all its expenses, interest and tax

While operating profit is the remaining income of a company after deducted operating expenses, net profit is essentially residual income left after paying all costs incurred or deductions

NOPAT, in comparison to net profit, is derived from the operating income of a business

It is the income generated along with operating expenses less taxes and interest or operating income x (1 – tax rate)

It is the income generated along with operating expenses less taxes and interest or operating income x (1 – tax rate)

While NOPAT is calculated after accounting for taxes, EBITDA is calculated prior to tax payments

While NOPAT is calculated after accounting for taxes, EBITDA is calculated prior to tax payments

One can calculate EBITDA by adding net income, interest, taxes, depreciation, and amortisation together or adding operating profit with depreciation and amortisation

One can calculate EBITDA by adding net income, interest, taxes, depreciation, and amortisation together or adding operating profit with depreciation and amortisation

Images: Pexels

Images: Pexels