Final answer:
The statement is false as operating income is generally considered to be the same as EBIT, both representing profits from business operations before interest and taxes. Both terms are used interchangeably in most financial contexts.
Step-by-step explanation:
The statement that operating income is not the same as EBIT is false. Operating income refers to the profit realized from a business's core operations, which means it is the earnings before the deduction of interest and taxes. In contrast, EBIT stands for Earnings Before Interest and Taxes. It is, in essence, a synonym for operating income because it also represents the profits from operating activities exclusive of interest and taxes.
Here is a step-by-step calculation to illustrate their equivalence:
- Start with gross revenue.
- Subtract the cost of goods sold (COGS) to calculate gross profit.
- Subtract operating expenses from the gross profit to get operating income.
- Since operating income doesn't include interest and taxes, it is effectively the same as EBIT.
It is important to note that while these two terms are often used interchangeably, there could be exceptions depending on the accounting practices of a company. However, in general accounting terms, operating income and EBIT typically refer to the same financial metric.