Financial modelling terms explained

Earnings before Interest and Taxes (EBIT)

Earnings before interest and taxes (EBIT) is the portion of a company's profit/income that is left after deducting all the costs, both recurring and non-recurring, from the revenues generated from operations during a set period of time. EBIT is a very important figure in the calculation of the company's performance.

What Is Earnings Before Interest and Taxes (EBIT)?

Earnings Before Interest and Taxes (EBIT) is a measure of a company's profitability that takes into account only its operating income (i.e. revenues minus costs of goods and services sold, minus depreciation and amortization). It excludes income from investments and from income taxes. EBIT is a key metric used in financial modeling to assess a company's profitability and to determine its valuation.

How Do You Calculate EBIT?

EBIT is short for Earnings Before Interest and Taxes. It is a measure of a company's profitability that takes into account both the company's operating income and the interest expenses on its borrowings, but does not take into account the company's income taxes. To calculate EBIT, start by calculating a company's net income. This is done by subtracting a company's total expenses from its total revenues. Once you have the company's net income, subtract the company's interest expenses from this number to get the company's operating income. Finally, add the company's income taxes to get the company's EBIT.

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