Earnings Before Interest and Taxes

Earnings Before Interest and Taxes (EBIT), also known as operating income, pertains to the operating earnings, operating profit, and profit before interest and taxes expenses are deducted. An indicator of a company’s profitability, EBIT is used to analyze the performance of a company’s core operations without the costs of the capital structure and tax expenses impacting profit. It is also a useful metric to identify an entity’s ability to generate enough earnings to be profitable, pay down debt, and fund ongoing operations. A company’s EBIT can be compared with that of other companies in the same industry to judge how well it is doing, and to decide if they want to change their ownership position.