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NOI (net operating income) versus EBIT (earnings before interest and taxes)

  • Net operating income (NOI) determines an entity's or property's revenue less all necessary operating expenses.
  • NOI does not take into account interest, taxes, capital expenditures, depreciation and amortization expenses.
  • Earnings before interest and taxes (EBIT) consists of revenues less expenses, excluding tax and interest, but takes into account depreciation and amortization
  • EBIT is calculated by subtracting a company's cost of goods sold (COGS) and operating expenses from its revenue.
  • NOI is generally used to analyze the real estate market and a house's or building's ability to generate income.
  • NOI also determines a property's capitalization rate, or rate of return.
  • A property's capitalization is calculated by dividing its annual NOI by the potential total sale price.
  • Operating income is considered an official financial measure under generally accepted accounting principles (GAAP) while EBIT is a non-GAAP measure

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