finance
EBIT
Earnings Before Interest and Tax. Same as operating profit.
Definition
EBIT is revenue minus all operating costs (including depreciation), but before interest and tax. It is functionally identical to operating profit. The difference between EBIT and EBITDA is depreciation and amortization. For service businesses with no heavy equipment, EBIT and EBITDA are nearly the same. For capital-heavy businesses, EBITDA is materially higher than EBIT and the choice of metric matters for valuation.
In your business
- →Use EBIT margin to benchmark against peers in your industry
- →If EBIT is positive but net profit is negative, the issue is debt/interest load
- →Track EBIT growth alongside revenue growth - revenue can grow while EBIT shrinks