Accounting for Financial Modeling

Operating Profit, EBIT and EBITDA

 Operating Profit

Revenue

Cost of Goods Sold

Gross Profit

Core Operations SG&A

R&D

D&A

Operating Profit earnings before interest and taxes (EBIT)

 Operating Profit
Firm 1 Firm 2

Firm’s Capital Debt

Equity
Structure
Equity

Operating Profit Operating Profit

Interest Expense Income Tax Expense

Income Tax Expense

Net Income Profitability
Profitability Net Income
 EBITDA

Operating Profit earnings before interest and taxes (EBIT)

D&A add back depreciation & amortization

EBITDA earnings before interest, taxes, depreciation and amortization

not affected by
EBITDA is a measure of
depreciation and
operating performance
amortization policy
Non-Recurring and Non-Core Expenses

Gain / losses Gain / losses Penalties /

Impairments /
on sale of on sale of legal
write down
fixed assets subsidiaries settlement

Gain / losses
Restructuring / Integration on sale of Severance
M&A fees costs financial costs
assets

Other one-off
costs
Reporting Non-Recurring and Non-Core Expenses

Revenue

Cost of Goods Sold

Gross Profit

SG&A

R&D

D&A

Other operating expenses

Operating Profit

Other non-operating expenses