What is the difference between the following accounting measures, if any?
- Gross profit
- Operating profit
- Net profit/income
So, here goes:
If you bought an orange for a dollar and sold it for two, you have one dollar of Gross Profit
If you're business paid someone \$100 to sell 200 oranges (like above), you would have \$200 in Gross profit, and \$100 in Operating Profit (assuming no other overhead like licenses, etc) for that business line. Operating Profit can be for a firm, business line, or whole company. Depreciation and Amortization can be included here for assets and debts in service to the entity or business line in question.
Typically Operating Profit tells whether a business line, unit, or company is profitable (independent of interest and taxes as explained below in the EBIT section).
Operating Profit and EBIT are not completely interchangeable in common parlance, though, as EBIT is typically used only for a company and Operating Income is often used both for Companies, and individual product lines within the company.
If the same business paid \$10 to incorporate, that would come out here, so your company's EBITDA would be \$90.
If you'd also used your \$100 office (independent of the orange selling operation or it would have also been in the orange selling Operating Profit line) for 1/100 of it's operating life, you would have \$1 in depreciation. Bringing your EBIT down to \$89. EBIT is almost always a company level statistic, and rolls up all Depreciation, Amortization, and costs other than Interest and Taxes.
The reason people analyze EBIT, is that it gives you a feeling for if the company could be profitable if moved to a different tax jurisdiction, or if its WACC (weighted average cost of capital) were changed through recapitalization.
So if you'd paid \$1 in interest on a \$100 loan to buy the oranges in the first place, you're pre-tax income would be \$88, which you would report to the appropriate tax agency, assuming a 35% corporate tax rate, you'd pay \$30.80 in taxes, leaving you a Net profit of \$57.20.
This is usually the "bottom line" of an income statement.
Operating expenses: include rent, equipment, inventory costs, marketing, payroll, insurance and funds allocated toward research and development
For EBITDA, I guess you can find it on your own !