Home > Accounting Glossary > Earnings Before Interest and Taxes (EBIT)
Earnings Before Interest and Taxes (EBIT): Definition and Meaning
Definition
Earnings before interest and taxes, commonly called EBIT, is a measure of operating profit before interest expense and income taxes.
Why It Matters
EBIT can help users compare operating performance without the effects of financing decisions and income-tax expense. It may be used in internal analysis, lending discussions, valuation work, or comparisons among companies.
EBIT is not a substitute for cash flow, net income, or financial statements prepared under an applicable accounting framework. Users should understand the exact calculation and use it with other performance measures.
Example
A business reports operating income before deducting loan interest and income taxes. That amount may be described as EBIT.
Related Terms
TYS provides accounting, tax, construction-accounting, and business-advisory support to closely held businesses, contractors, individuals, and families. With offices in Fairport, New York, and Walnut Creek, California, TYS helps clients better understand their financial information and prepare for important decisions.
Have a question about Earnings Before Interest and Taxes (EBIT) or your business’s financial reporting?
Contact TYSThe information on this page is provided for general educational purposes only and is not accounting, tax, legal, financial, insurance, bonding, or business advice. Consult qualified professionals regarding your particular circumstances.
Back to the Accounting Glossary →