defour44

Chuckrox8 Wrote:
-------------------------------------------------------
> Thecodont Wrote:
> --------------------------------------------------
> -----
> > No that is wrong. CFAI clearly states that
> > operating income is EBIT.
> >
> > "Operating income reflects the a company's
> profits
> > from its usual business activities, before
> > deducting interest expenses or taxes"
> >
> > Source is CFAI 2008 FSA Volume 3 level 1 page
> 13
> >
> >
> > Because of what people tell you on the
> > forum...they often as as confused as you...that
> > goes for me too!
>
> Sorry bro, but you are actually wrong. The CFAI
> never ever states that operating income and EBIT
> are the same thing. (Find that in the text) They
> do use the two terms interchangeably throughout
> the text. If a company had no non-ordinary items
> then yes, EBIT and Operating Income would be the
> same, but that is rarely the case.
>
> "Operating income reflects the a company's profits
> from its usual business activities, before
> deducting interest expenses or taxes"
>
> Note the key word USUAL. Operating Income/Profit
> only includes USUAL business income and expenses.
> EBIT is one line down and includes
> unusual/non-ordinary gains or expenses. Maybe you
> should have a little more faith in the forum.


I think you are getting confused. The CFAI says that you need to adjust EBIT for non-reoccurring items NOT non operating items as you suggest here

"EBIT includes income generated from nonoperating activities. "

Further CFAI 2008 FSA Volume 3 level 1 page 170 says
" Nonoperating items are reported separately from operating income"