[Anonymous]

I thought Operating Profit = EBIT. However, I have a Wiley test bank anwser that says Operating Profit = (Sales – COGS – G&A).

[Mr. Mini]

Operating profit can be synonymous with EBIT, but it does not always have to be. For example a company could have a significant amount on non-operating income, which would be included in EBIT but not in operating profit.

[Anonymous]

What about depreciaiton expense? I have a Wiley test bank awnser that is NOT including depreciation in Operating Profit. Is that correct?

[Mr. Mini]

Operating profit is net of any D&A expense.

[Anonymous]

Wiley Problem:

Income Statement:

Sales $700

COGS (500)

G&A (80)

Int. Exp (30)

Inc. Tax (10)

____________

Net Income $80

Other Info:

Depr Exp $15

Calculate the operating profit margin from above:

Wiley Correct anwser: (700-500-80) = 120; 120/700 = 17.1%

I think it should be (700-500-80-15) = 105/700 = 15%; this is not one of the anwser choices. Is 15% the correct anwser?

Mr. Mini – Thanks for your help with this.

[Mr. Mini]

They threw in the additional information on the Depreciation expense just to throw you off. You are expected to know that depreciation expense is already included in the G&A. Wiley is right on this one.

[Anonymous]

Thats what I was missing. Thank you for the help. That kinda mistake on the exam is the difference between a 71 and 75.

[Author]

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