BUSINESS SPEAK · EBIT
EBIT: Earnings before interest and taxes
Profit before borrowing costs and income tax, with depreciation still deducted.
What it means
EBIT is net profit plus interest expense and income taxes. Unlike EBITDA, it still includes the cost of depreciation and amortisation. In the simplified Profit calculator, with no non-operating income or expenses, EBIT equals operating profit.
Where you’ll meet it
- Use EBIT to compare earnings before the effects of financing and income tax. Depreciation matters especially for businesses that rely on equipment or property.
- Reported operating profit and EBIT can differ when non-operating income or expenses are included. EBIT is not cash flow and does not show equipment spending or changes in working capital.
Worked example
Scenario: Net profit is 80,000 after interest of 10,000 and income tax of 20,000. Depreciation and amortisation are 15,000.
- EBIT = 80,000 + 10,000 + 20,000 = 110,000
- Depreciation and amortisation remain deducted in EBIT
- EBITDA = 110,000 + 15,000 = 125,000
Answer: EBIT is 110,000; EBITDA is 125,000. Neither figure is the same as cash flow.