EBIT (Earnings Before Interest and Taxes) is a measure of a company's operating performance that excludes the impact of financing and tax decisions.

It represents the profit a company generates from its core business operations before considering:

• Interest expenses on debt
• Income tax payments
• Non-operating income or expenses

EBIT is also known as Operating Income or Operating Profit.

EBIT is useful for:

• Company Comparison: Compare operating performance across companies with different capital structures
• Operational Focus: Evaluate how well management runs core business operations
• Valuation: Used in financial ratios and valuation multiples
• Credit Analysis: Assess ability to service debt obligations
• Trend Analysis: Track operational performance over time

Company ABC Financial Data:

• Revenue: $1,000,000
• COGS: $400,000
• Operating Expenses: $300,000
• Other Operating Income: $50,000

Calculation:

EBIT = $1,000,000 - $400,000 - $300,000 + $50,000 = $350,000

EBIT Margin = $350,000 ÷ $1,000,000 = 35%