2 July 2021
EBIT stands for Earnings Before Interest and Taxes. By taking interest payments and income taxes away from the profit figure it basically eliminates the effects of the different capital structures and tax rates used by different companies.
EBIT is very closely related to operating profit and often the same.
EBIT provides a profitability figure that is better comparable across companies. A further evolution is also taking out depreciation and amortisation (see EBITDA).
EBIT = Revenue – Operating Expenses
This indicator is included in the book: Key Performance Indicators – the 75+ measures every manager needs to know, which contains an in-depth description of this KPI, as well as practical advice on data collection, calculations, target setting, and actual usage.
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