EBIT (Earnings Before Interest and Taxes)

Definition: EBIT (Earnings Before Interest and Taxes), also called Operating Profit, is a profitability measure that isolates earnings from a company's core op…

EBIT (Earnings Before Interest and Taxes), also called Operating Profit, is a profitability measure that isolates earnings from a company's core operations before the effects of capital structure (interest) and taxation. EBIT = Revenue − Cost of Goods Sold − Operating Expenses, or equivalently Net Income + Interest Expense + Income Tax Expense. EBIT is used in Times Interest Earned (Interest Coverage), Fixed Charge Coverage, EV/EBIT multiples, and the operating-margin step of the 5-factor DuPont decomposition. Because it strips out interest, EBIT enables comparison of operating performance across firms with different debt levels.