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MyWikiBiz, Author Your Legacy — Friday May 31, 2024
Jump to navigationJump to searchEarnings before interest and taxes (view source)
Revision as of 10:18, 2 November 2006
, 10:18, 2 November 2006no edit summary
'''Earnings before interest and taxes''' (EBIT), also known as '''operating income''' and '''operating profit''', is a term used to describe a company's earnings. A professional investor contemplating a change to the [[capital structure]] of a firm (e.g., through a [[leveraged buyout]]) first evaluates a firm's fundamental earnings potential (reflected by [[EBITDA]] and EBIT), and then determines the optimal use of debt vs. equity. To calculate EBIT, basic expenses (e.g., the [[cost of goods sold]], selling and administrative expenses) are subtracted from revenues. [[Net income|Profit]] is later obtained by subtracting interest and taxes from the result.
