Write the difference between Net operating income and net income.
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29-09-2020 - |
Question
Write the difference between Net operating income and net income.
The major differences between net operating income and net income are as follows −
Net operating income
No relevance in capital structure.
Degree of leverage is irrelevant to cost of capital (assumes).
It has constant cost of capital.
Equity value is residual.
Changes perception of investor with increase in debt.
Net income
Relevance in capital structure.
Change in degree of leverage will change WACC (assumes).
No taxes.
Cost of debt is less than cost of equity.
Change in debt will not change perception of investors.
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