Operating result
The operating result is the sum of operating income minus the sum of operating expenses: what the company earns from its ordinary activities, before financial income and expenses and taxes. Also called EBIT.
What does operating result mean?
The operating result is the sum of operating income minus the sum of operating expenses: what the company earns from its ordinary activities, before financial income and expenses and taxes. Also called EBIT.
Operating result is the income from normal business operations after operating costs, before net financing items and income tax. Depending on the layout, specific items may be shown separately. It is not net profit or cash flow.
How does it work?
The law does not use the word operating result. Art. 2:377(1) DCC speaks of the result from ordinary business activities, and that also includes interest income, interest expense and the result from participating interests. The operating result is a subtotal above that. In the by-nature model E of the Decree on annual accounts models (Besluit modellen jaarrekening) it is the sum of operating income minus the sum of operating expenses. In the by-function model F it is the net turnover result plus other operating income. Such a subtotal may be inserted and labelled (art. 5(3) of the decree).
Operating expenses also include depreciation and impairments of intangible and tangible fixed assets (art. 2:377(3)(h) DCC). Interest income and expense, value changes of securities and the share in the result of participating interests come below it and are not counted. Items of exceptional size stay in the operating result and are disclosed by amount and nature (paragraph 8).
Example
A manufacturing company (BV), model E, financial year 2025. Net turnover € 900.000 and other operating income € 10.000: sum of operating income € 910.000. Raw materials and consumables € 380.000, wages and social security charges € 290.000, depreciation € 45.000 and other operating costs € 115.000: sum of operating expenses € 830.000. Operating result: 910.000 − 830.000 = € 80.000, or 8,9% of turnover. Next come € 14.000 of interest expense and € 1.000 of interest income: result before tax € 67.000. Corporate income tax at 19%: € 12.730. Result after tax: € 54.270.
In the annual accounts
P&L shown in more detail for medium-sized and large entities; for small ones often internal.
Difference from EBITDA
EBITDA is the operating result plus depreciation and amortisation. In the example: 80.000 + 45.000 = € 125.000. The operating result thus treats wear of machinery and software as an expense, EBITDA does not. For a capital-intensive company the two are far apart; for a consultancy with no fixed assets they almost coincide.
Common mistakes
- Counting interest as operating income
- Confusing operating result with EBITDA
What should you watch for?
- Check that interest on loans and on the current account is not included in other operating costs; that wrongly depresses the operating result.
- The salary of the director-major shareholder is an operating expense, his dividend is not. A low salary with a high dividend flatters the operating result compared with companies that pay a market-rate salary.
- Small and medium-sized legal entities may combine net turnover, change in inventory, capitalised production, other operating income and the cost of raw materials and consumables into one item, gross operating result (art. 2:396(4) DCC and art. 2:397(3) DCC). The operating result follows below it, after wages, depreciation and other operating costs.
Legal basis and source
art. 2:377 DCC
Frequently asked questions
Is operating result the same as EBIT?
In practice the terms are used interchangeably. EBIT is not a statutory term and some companies add the result from participating interests. So check which lines are included in the calculation.
Can the operating result be positive while the BV makes a loss?
Yes. Interest expense and a write-down of a participating interest come below the operating result. A BV with an operating result of € 80.000 and interest expense of € 95.000 closes the year with a loss before tax of € 15.000.
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