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

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

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) and interest ($10) your EBT would be $70-$10-$10-$10 = $40.

EBT is crucial because it removes the effects of taxes when comparing businesses. For example, while U.S.-based corporations face the same tax rates at the federal level, they face different tax rates at the state level. Since companies may pay different tax rates in different states, EBT allows investors to compare the profitability of similar companies in various tax jurisdictions. Further, EBT is used to calculate performance metrics, such as pretax profit margin.