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EBIT
(Earnings Before Interest and Taxes)
EBIT (Earnings Before Interest and Taxes) measures a company's operating profitability before capital structure and tax impacts. Calculated as Revenue - Operating Expenses (excluding interest and taxes), it's also called operating income.
EBIT helps compare companies with different debt levels or tax situations. Analysts often use EBIT multiples for valuation. A related metric, EBITDA, adds back depreciation/amortization. EBIT margins vary by industry - software companies might average 25% while retailers 5%. EBIT is crucial for calculating ROA and other profitability ratios. Unlike net income, EBIT isn't distorted by one-time items or tax strategies, making it useful for operational analysis.
EBIT helps compare companies with different debt levels or tax situations. Analysts often use EBIT multiples for valuation. A related metric, EBITDA, adds back depreciation/amortization. EBIT margins vary by industry - software companies might average 25% while retailers 5%. EBIT is crucial for calculating ROA and other profitability ratios. Unlike net income, EBIT isn't distorted by one-time items or tax strategies, making it useful for operational analysis.