EBIT – simple method
EBIT – normal method
Definition – What is EBIT?
EBIT (Earnings before Interest and Taxes) is a measurement of profitability of a firm. It is also known as operating profit.
Formula – How to calculate EBIT
EBIT (simple) = Revenue – Operating Expense
EBIT (alternate) = Net Income + Interest + Taxes
(Simple) – A company has revenue of $17,000 and operating expenses of $5,500.
EBIT (simple) = $17,000 – $5,500 = $11,500
(Normal) – A company has net income of $2,100, and pays interest of $2,500 and taxes of $3,500.
EBIT (normal) = $2,100 + $2,500 + $3,500 = $8,100
Sources and more resources
- Houston Chronicle – Difference between EBIT and Profit Before Taxes – Some of the differences between EBIT and Profit before taxes.
- Wikipedia – Earnings before interest and taxes – Wikipedia’s entry on EBIT. Includes an example from a balance sheet.
- Investopedia – Earnings Before Interest & Taxes & What is the difference between EBIT and EBITDA – An explanation of EBIT and a comparison with EBITDA.