EBIT is an accounting term that stands for “earnings before interest and taxes.” It is a measure of a company’s profitability that excludes interest and tax expenses. EBIT can be used to compare companies of different sizes and sectors, as well as to compare a company’s performance over time.
Investors often use EBIT as a metric when considering whether to invest in a company. They may also compare a company’s EBIT to the EBIT of its competitors in order to get a sense of how the company is performing relative to others in its industry.
EBIT is calculated by taking a company’s net income and adding back interest and tax expenses. For example, assume a company has a net income of $100,000 and interest expense of $10,000 and taxes of $5,000. The company’s EBIT would be $95,000 ($100,000 + $10,000 – $5,000).