Gross Profit vs Operating Income [Video]

Gross profit is equal to net sales minus cost of goods sold. Thus, gross profit is the company’s profit after accounting for the cost of making or buying inventory.

Operating income, on the other hand, is equal to net sales minus cost of goods sold and operating expenses (SG&A expense, R&D expense, etc.).

Operating income is sometimes referred to as EBIT (earnings before interest and taxes). But operating income is only equal to EBIT when the company doesn’t have any nonoperating revenues/expenses other than interest.
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