what is ebit

EBIT stands for "Earnings Before Interest and Taxes" and is a measure of a companys profitability. It is calculated as revenue minus expenses, excluding tax and interest. EBIT is also known as operating earnings, operating profit, and profit before interest and taxes. By ignoring taxes and interest expenses, EBIT identifies a companys ability to generate enough earnings to be profitable, pay down debt, and fund ongoing operations. EBIT is a commonly used profitability metric for relative valuation and peer comparisons because it is unaffected by discretionary decisions such as debt financing, non-core income sources, one-time corporate decisions, and taxes. EBIT is different from EBITDA in that the metric abides by GAAP reporting standards and thus appears on the income statement, while EBITDA is a non-GAAP metric that adds back depreciation and amortization, among other adjustments.