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EBT definition

Description

EBT is a metric measure that can be explained as the money earned by a company before deducting taxes. Data to calculate this ratio is collected from the income statement. In a simple way, earnings before taxes is a measure that allows comparing companies from different countries.

EBT value is important when comparing companies from the same area of industry. It is particularly important for company’s owners and investors. Sometimes EBT is referred to as profit before taxes (PBT).

Norms and limitations

There are no norms or limitations on the value of this measure

Value of EBT depends from the great number of facts and reasons (political, economical, juridical…). So it would be very hard to determine the right norms and limitations.

Formula

Net income (net profit, net earnings), usually called the “the bottom line”, is a measure, which is calculated by taking revenues (sales and other incomes) and adjusting them to the cost of sales, operating cost, depreciation and amortization, interest, taxes and other expenses.

A tax is a measure that governments impose on financial income generated by all entities within their jurisdiction.