EBIT

Knowledge Center

• About
• Home
• Dictionary
• Encyclopedia
• Question?
• Views

• Register
• Log in
• Help

• Change & Organization
• Communication & Skills
• Decision-making & Valuation
• Ethics & Responsibility
• Finance & Investing
• HRM
• Knowledge & Intangibles
• Leadership
• Marketing
• Program & Project
• Strategy
• Supply Chain & Quality

Explanation of Earnings Before Interest and Tax. EBIT.

What is EBIT?

Earnings Before Interest and Tax includes all profits from operations, before interest and income taxes are deducted. Normally, non-operating profits and non-operating expenses are not included in EBIT. Earnings Before Interest and Tax (EBIT) is a traditional measurement method that does not include the cost of capital. Other words for EBIT are Operating Profit and Operating Earnings.

Calculation of EBIT

The formula of EBIT is straightforward:

      Net Sales

-     Operating Expenses

------------------------------------------------------

      Operating Profit (EBIT)

An advantage of EBIT is it is easy to calculate and observe at divisional or sub divisional levels of the firm.

A disadvantage of EBIT is it does not include the cost of capital. Compare EVA, CFROI and Economic Margin, which are all including the cost of capital.

Instead of EBIT, also the terms Operating Profit and Operating Earnings are widely used.

Book: Steven M. Bragg - Business Ratios and Formulas : A Comprehensive Guide -

Book: Ciaran Walsh - Key Management Ratios -

Earnings Before Interest and Tax Forum   What is Consolidated Operating Income (COI)? Several days ago I met this term "COI", then I tri...           Thrid Party Share and Participations in EBIT? Turning around the definition: Net Profit + Intere...           EBIT and Operating Leverage Finding the EBIT is very important because it will...           EBIT and DIrect and Indirect Expenses Does EBIT include all the direct & indirect expens...           Measuring Financial Performance What are the most important tools while evaluating...           EBIT Before of After End of Year When do we earn more: if we declare dividend befor...           What is Return on Sales? Definition Also the term Return on Sales is often used to ind...         Start a new topic

Earnings Before Interest and Tax Special Interest Group Special Interest Group

Earnings Before Interest and Tax Education & Events Find Trainings, Seminars and Events

Best Practices - Earnings Before Interest and Tax Premium

Expert Tips - Earnings Before Interest and Tax Premium   What are the Indicators of High Quality of Earnings? The term quality of earnings usually refers... Usage (application): Analyzing Reported Earnings       What is the Degree of Management Discretion or Manipulation? The discretionary nature of income recognition per... Usage (application): Analyzing Reported Earnings

Resources - Earnings Before Interest and Tax Premium 3 Minute Introduction to Financial Ratio Analysis: Why do it and What are the Main Types? Why financ... Usage (application): Types of Financial Ratios, Financial Ratio Analysis, Financial Ratio Types     News about Ebit Measurement         News about Ebit Valuation         Videos about Ebit Measurement         Videos about Ebit Valuation         Presentations about Ebit Measurement         Presentations about Ebit Valuation         Books about Ebit Measurement         Books about Ebit Valuation         More about Ebit Measurement         More about Ebit Valuation

Compare with:  EBITDA  |  P/E Ratio  |  PEG Ratio  |  Relative Value of Growth  |  Economic Value Added  |  Economic Margin  |  Cash Ratio  |  Current Ratio  |  Earnings Per Share  |  Return on Equity  |  Return on Invested Capital  |  Market Value Added  |  CFROI  |  Fair Value  |  TSR

Return to Management Hub: Decision-making & Valuation  |  Finance & Investing

More Management Methods, Models and Theory