Earnings before interest and taxes


Earnings before interest and taxes
Accountancy
Key concepts
Accountant · Accounting period · Bookkeeping · Cash and accrual basis · Cash flow management · Chart of accounts · Journal  · Special journals · Constant Item Purchasing Power Accounting · Cost of goods sold · Credit terms · Debits and credits · Double-entry system · Mark-to-market accounting · FIFO & LIFO · GAAP / IFRS · General ledger · Goodwill · Historical cost · Matching principle · Revenue recognition · Trial balance
Fields of accounting
Cost · Financial · Forensic · Fund · Management · Tax
Financial statements
Statement of financial position · Statement of cash flows · Statement of changes in equity · Statement of comprehensive income · Notes · MD&A · XBRL
Auditing
Auditor's report · Financial audit · GAAS / ISA · Internal audit · Sarbanes–Oxley Act
Accounting qualifications
CA · CPA · CCA · CGA · CMA · CAT · CFA  · CIIA  · ACCA  · CIA  · CTP · ICAEW · CIMA  · IPA  · ICAN
This box: view · talk · edit

In accounting and finance, earnings before interest and taxes (EBIT) is a measure of a firm's profit that excludes interest and income tax expenses.[1] Operating income is the difference between operating revenues and operating expenses. When a firm has zero non-operating income, then operating income is sometimes used as a synonym for EBIT and operating profit.[2]

EBIT = RevenueOperating expenses (OPEX) + Non-operating income

Operating income = Revenue – Operating expenses[1]

A professional investor contemplating a change to the capital structure of a firm (e.g., through a leveraged buyout) first evaluates a firm's fundamental earnings potential (reflected by Earnings Before Interest, Taxes, Depreciation and Amortization EBITDA and EBIT), and then determines the optimal use of debt vs. equity.

To calculate EBIT, expenses (e.g., the cost of goods sold, selling and administrative expenses) are subtracted from revenues.[3] Profit is later obtained by subtracting interest and taxes from the result.

Statement of Income — Example
(figures in millions)
Revenue
     Sales Revenue $20,438
Operating Expenses
     Cost of goods sold $7,943
     Selling, general and administrative expenses $8,172
     Depreciation and amortization $960
     Other expenses $138
         Total operating expenses $17,213
Operating income $3,225
     Non-operating income $130
Earnings before Interest and Taxes (EBIT) $3,355
     Net interest expense/income $145
Earnings before income taxes $3,210
     Income taxes $1,027
Net Income $2,183

(Table info source: Bodie, Z., Kane, A. and Marcus, A. J. Essentials of Investments, McGraw Hill Irwin, 2004, p. 452.)

See also

References

  1. ^ a b Bodie, Z., Kane, A. and Marcus, A. J. Essentials of Investments, McGraw Hill Irwin, 2004, p. 452. ISBN 0-07-251077-3
  2. ^ http://www.investorwords.com/3460/operating_income.html Operating income definition
  3. ^ http://www.investorwords.com/1631/EBIT.html EBIT definition

Wikimedia Foundation. 2010.

Look at other dictionaries:

  • Earnings before interest and taxes — L earnings before interest and taxes (EBIT) est un élément clé de la comptabilité des sociétés. Il correspond au chiffre d affaires net duquel sont déduites les charges d exploitation (telles que salaires, cotisations sociales, matières, énergie …   Wikipédia en Français

  • Earnings Before Interest and Taxes — ( EBIT) A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest and income taxes. Bloomberg Financial… …   Financial and business terms

  • Earnings before interest and taxes (EBIT) — A financial measure defined as revenues less cost of goods sold and selling, general, and administrative expenses. In other words, operating and non operating profit before the deduction of interest and income taxes. The New York Times Financial… …   Financial and business terms

  • Earnings Before Interest After Taxes — ( EBIAT) A financial measure defined as revenues less cost of goods sold and selling, general and administrative expenses. In other words, operating and nonoperating profit before the deduction of interest plus cash income taxes. Equivalent to… …   Financial and business terms

  • Earnings before interest and tax — EBIT ist eine betriebswirtschaftliche Kennzahl und sagt etwas über den betrieblichen Gewinn eines Unternehmens in einem bestimmten Zeitraum aus. EBIT ist die Abkürzung für englisch: earnings before interest and taxes. Das heißt wörtlich übersetzt …   Deutsch Wikipedia

  • Earnings Before Interest After Taxes - EBIAT — An indicator of a company s financial performance calculated as: = Revenue COGS Expenses (including taxes and excluding interest) Where: COGS= cost of goods sold This is one variation of Earnings Before Interest and Tax EBIT …   Investment dictionary

  • Earnings before interest, taxes, depreciation and amortization — (EBITDA) is a non GAAP metric that can be used to evaluate a company s profitability.::EBITDA = Operating Revenue – Operating Expenses + Other RevenueIts name comes from the fact that Operating Expenses do not include interest, taxes, or… …   Wikipedia

  • Earnings before interest, taxes, depreciation, and amortization — En finance, l expression de langue anglaise Earnings before Interest, Taxes, Depreciation, and Amortization, connue par son sigle EBITDA désigne les revenus avant intérêts, impôts (taxes), dotations aux amortissements et provisions sur… …   Wikipédia en Français

  • Earnings Before Interest Taxes Depreciation and Amortization — noun income before interest and taxes and depreciation and amortization have been subtracted; an indicator of a company s profitability that is watched by investors (especially in leveraged buyouts) • Syn: ↑EBITDA • Hypernyms: ↑income …   Useful english dictionary

  • earnings before interest, taxes, depreciation, and amortization — UK US noun [U] ACCOUNTING, FINANCE ► EBITDA(Cf. ↑EBITDA) …   Financial and business terms


Share the article and excerpts

Direct link
Do a right-click on the link above
and select “Copy Link”

We are using cookies for the best presentation of our site. Continuing to use this site, you agree with this.