EBIT
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Written by Nate Jewell
Updated over a week ago

What is EBIT?

  • Definition: Earnings before interest and taxes (EBIT) is an indicator of a company's profitability. EBIT can be calculated as revenue minus expenses excluding tax and interest. EBIT is also referred to as operating earnings, operating profit, and profit before interest and taxes.

  • In Plain English: EBIT is what’s left of your revenue after taking out Cost of Goods Sold, Operating Expenses, Depreciation and Amortization.

  • Example: If you sold two pairs of shoes for $100 each your revenue would be $200. Less your cost of goods sold (what it took to make the shoes) $40 per pair = $40+$40=$80, and minus your operating expenses (what it takes to run the business) $50 you end up with your EBITDA = $200-$80-$50 = $70. If you then subtracted out your depreciation ($10) and amortization ($10) your EBIT would be $70-$10-$10 = $50.

Why Should You Care?

  • EBIT is an important measure of a firm's operating efficiency. Because it does not take into account indirect expenses such as taxes and interest due on debts, it shows how much the business makes from its core operations.

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