EBIT

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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 Special Interest Group Special Interest Group (32 members)

Earnings Before Interest and Tax Forum   In the forum section you will find recent discussions within this knowledge area.   EBIT and Operating Leverage (1 reactions) Finding the EBIT is very important because it will tell you ...           EBIT and DIrect and Indirect Expenses (2 reactions) Does EBIT include all the direct & indirect expenses of the ...           What is Return on Sales? Definition (0 reactions) Also the term Return on Sales is often used to indicate EBIT...           What is Consolidated Operating Income (COI)? (1 reactions) Several days ago I met this term "COI", then I tried to find...           Thrid Party Share and Participations in EBIT? (0 reactions) Turning around the definition: Net Profit + Interest + Tax =...           Measuring Financial Performance (0 reactions) What are the most important tools while evaluating the finan...           EBIT Before of After End of Year (0 reactions) When do we earn more: if we declare dividend before finishin...

Best Practices - Earnings Before Interest and Tax In the best practices section you will find the best forum discussions within this knowledge area.

Expert Tips - Earnings Before Interest and Tax In the expert tips section you will find advices from experts within this knowledge area.   What are the Indicators of High Quality of Earnings? Analyzing Reported Earnings...       What is the Degree of Management Discretion or Manipulation? Analyzing Reported Earnings...

Resources - Earnings Before Interest and Tax In the Resources section you will find powerpoint presentations, micro-learning videos, articles, news items, etc. within this knowledge area. 3 Minute Introduction to Financial Ratio Analysis: Why do it and What are the Main Types? 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

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