Definition

Earnings before Interest and Taxes is a measure of a firm’s profitability and includes all revenues and expenses except interest and taxes.

Why use it

EBIT measures the operating profit and thus shows the profitability of a business.

AliasProfit before Interest and Taxes
AbbreviationEBIT
UnitCurrency (Euro/Dollar/YEN/…)

 

Calculation

EBIT is calculated by deducting all operating and non operating expenses except interest and taxes from the revenue.

Revenue
– Expenses (Interest & Taxes excluded)
EBIT

Example

The previous year a company had a revenue of 440.000 € and expenses of 410.000 €.

440.000 €
– 410.000 €
30.000 €