Earnings before interest and taxes

From Wikipedia, the free encyclopedia

Earnings before interest and taxes (EBIT), also known as operating income and operating profit, is a term used to describe a company's earnings. 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 EBITDA and EBIT), and then determines the optimal use of debt vs. equity. To calculate EBIT, basic expenses (e.g., the cost of goods sold, selling and administrative expenses) are subtracted from revenues. Profit is later obtained by subtracting interest and taxes from the result.

[edit] See also

• EBITDA
• Net income

[edit] External links

• operating income definition
• calculating net operating incomede:EBIT

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