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What is EBIT?

Author:
Harold Averkamp, CPA, MBA

EBIT is the acronym for earnings before interest and taxes. In other words, EBIT is a corporation’s net income assuming it had no interest expense and no income tax expense. (Since the amount of earnings is based on the net income reported on the income statement, a corporation’s other comprehensive income is not considered.)

A corporation’s EBIT could be the same as its operating income. However, if the corporation has nonoperating revenues and/or gains and/or certain losses, the EBIT will differ from operating income.

EBIT is not a GAAP metric but EBIT may facilitate the comparison of companies’ operating results for the following reasons:

  • Some corporations are Subchapter S Corporations which do not report corporation income tax expense
  • Some corporations are C Corporations which do report corporation income tax expense
  • Some corporations have significant debt and therefore report significant interest expense
  • Some corporations have little or no debt and therefore report little or no interest expense
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About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

Learn More About Harold

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