expert
Expert with best answer

Vlad

97% Recommendation Rate

364 Meetings

5,231 Q&A Upvotes

USD 229 / Coaching

How to calculate "Net operating profit"?

Anonymous A asked on Mar 08, 2018 - 2 answers

Hi,

I was just wondering how to calculate the net operating profit of a firm. During university I only learned how to calculate the operating cash flow and do not know if there is a difference between these two?

I calculate operating cash flows like this:

Revenue

- Costs

- Depreciation

= EBIT

- TAX

= EBIAT

+ Depreciation

= Operating cash flows

Is this correct so far? I read that net operating profit is like EBIAT because in a calculation I read online they did not add depreciation again.

Thanks for helping me to understand this

2 answers

  • Upvotes
  • Date ascending
  • Date descending
Best Answer
Vlad
Expert
updated his answer on Mar 08, 2018
McKinsey / Accenture / Got all BIG3 offers / More than 300 real MBB cases / Harvard Business School
Book a coaching with Vlad

97% Recommendation Rate

364 Meetings

5,231 Q&A Upvotes

USD 229 / Coaching

Hi,

Net operating profit (Or net Income) = EBIT - interest income - income taxes

You'll don't need EBIAT formula on the case interviews. Net income will be useful

Best!

(edited)

Hi, I think interest income can be generalized to "non-operating profits", while it can be before-tax or after-tax. If after-tax, I normally do a theoretical tax on the operating income only — Angelo on Mar 09, 2018

Angelo, that's why I am subtracting it in line with taxes. Btw, you will never have interest income in consulting cases — Vlad on Mar 09, 2018

Andrea
Expert
replied on Mar 09, 2018
Former BCG decision round interviewer with 300+ real interviews in 8 years
Book a coaching with Andrea

100% Recommendation Rate

109 Meetings

756 Q&A Upvotes

USD 269 / Coaching

Explanation is correct, wanted to reassure that unless you were a financial analyst or in banking or consulting for the past few years this will likely not be asked at an MBB interview and you can ask for guidance on how to calculate.

hope it helps,

andrea

Related BootCamp article(s)

Getting Up to Speed

In order to repeatedly demonstrate prerequisite skills under the pressure of a real case interview, you need to learn the basics and practice cases.

Related case(s)

Hospital's ill finances

Solved 5.4k times
4.5 5 712
| Rating: (4.5 / 5.0)

A firm managing hospitals has recently been experiencing growing pains. It has contacted our firm to ask for help. Open whole case