EBIT Calculator - Earnings Before Interest and Tax

Written by:
PK

Below is an EBIT calculator, or Earnings Before Interest and Tax Calculator. Enter a company's net income, interest expenses in the period, and tax expense to compute its EBIT.

What is EBIT?

EBIT, or Earnings Before Interest and Tax, is an alternative measure of earnings that adjusts for a company's capitalization and tax jurisdiction. It is useful in comparing a company's performance across time, tax policy, and interest rates. It's also helpful when evaluating the business to see if there is any efficiency in changing how it is capitalized and organized.

In many companies, operating profits (sometimes rendered profits from operations or income from operations) are equivalent to EBIT. However, companies that break out investment gains, provisions for taxes, special expenses, and other charges and benefits may not match from both directions – by definition, those charges or additions aren't from operations.

As EBIT considers interest expenses, it's usually tied to enterprise value based metrics, as opposed to market capitalization based ones. EV/EBIT, or enterprise value to EBIT ratio is a common relative valuation metric (used in a similar way to price to earnings or P/E).

EBIT has less adjustments than the commonly used EBITDA, which adds back depreciation and amortization. EV/EBITDA is also a common relative value ratio.

EBIT Formula

The formula for EBIT is:

EBIT=net\ income+interest\ expense+tax\ expense

Where:

• Net Income: Net income from the income statement
• Interest Expense: Amount the company paid in the period to service its debt
• Tax Expense: Amount paid in taxes in the period

PK

PK started DQYDJ in 2009 to research and discuss finance and investing and help answer financial questions. He's expanded DQYDJ to build visualizations, calculators, and interactive tools.

PK lives in New Hampshire with his wife, kids, and dog.