Define EBITDA, EBIT, and Net Income and explain how they flow from revenue to net income in a standard model.

• A. EBITDA = Revenue - COGS - OPEX (excluding D&A); EBIT = EBITDA - D&A; Net Income = EBIT - Interest - Taxes; each line feeds the next via depreciation, interest, and tax charges.
• B. EBITDA = Net Income + Taxes
• C. EBITDA = Revenue - COGS; EBIT = Revenue - OPEX; Net Income = EBIT - D&A
• D. EBITDA = Revenue - COGS - OPEX (excluding D&A); EBIT = EBITDA - D&A; Net Income = EBIT - Interest - Taxes; - both lines feed the next via depreciation, interest, and tax charges.

Answer: (D)

The essential idea is how EBITDA, EBIT, and Net Income are defined and how they line up in a standard model from revenue down to profit. EBITDA represents cash operating profitability before non-cash and financing charges, EBIT includes the non-cash depreciation and amortization, and Net Income finally accounts for financing costs and taxes.

From revenue, subtract COGS and operating expenses excluding D&A to get EBITDA. This step isolates operating performance without the impact of non-cash depreciation. Then subtract depreciation and amortization to arrive at EBIT, which reflects operating income after those non-cash charges. After that, subtract interest to get earnings before taxes, and finally subtract taxes to arrive at Net Income. In shorthand, Net Income can be viewed as EBIT minus interest and taxes, since taxes apply to earnings after interest (EBT).

This flow is exactly what the correct option describes, emphasizing that D&A is excluded at the EBITDA stage but included when moving to EBIT, and that taxes and interest occur after EBIT in determining net income.