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EBIT

Earnings Before Interest and Taxes

Description

EBIT is a metric measure that is calculated by adding net income to interest and income taxes. EBIT is a very popular and often used financial profitability measure. Data to calculate this ratio is collected from the income statement. EBIT is also referred to as operating earnings, operating profit or operating income because this measure shows company’s profit which mostly evaluates operating cost.

Norms and limitations

Higher value of EBIT indicates better state of the company. However EBIT is not a relative ratio.

EBIT is a metric measure that will not indicate how efficiently assets and resources are used.

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