Legal Definitions - EBIT

EBIT

EBIT stands for Earnings Before Interest and Taxes. It is a financial metric that shows a company's profitability before taking into account the costs of interest and taxes.

Let's say a company has a revenue of $1 million and expenses of $800,000. The company also pays $50,000 in interest on loans and $20,000 in taxes. The EBIT for this company would be $130,000 ($1 million - $800,000 = $200,000 - $50,000 - $20,000 = $130,000).

Another example would be a company that has a revenue of $500,000 and expenses of $400,000. The company does not have any interest or tax expenses. The EBIT for this company would be $100,000 ($500,000 - $400,000 = $100,000).

EBIT is a useful metric for investors and analysts to evaluate a company's profitability without the influence of interest and taxes. By looking at a company's EBIT, investors can get a better understanding of how much money the company is making from its core operations. In the first example, the company's EBIT is $130,000, which means that the company is making a profit of $130,000 before taking into account the costs of interest and taxes. In the second example, the company's EBIT is $100,000, which means that the company is making a profit of $100,000 solely from its core operations.