What is EBIT (Earnings Before Interest and Taxes)?
Nexa Consultancy | Startup & Finance Glossary
Earnings Before Interest and Taxes (EBIT) is a measure of a company's operating profitability. It is calculated by subtracting all operating expenses, including the cost of goods sold (COGS) and selling, general, and administrative (SG&A) expenses, from total revenue. It is also known as Operating Income.
For Startups: EBIT is a useful metric for startups because it shows the profitability of the core business operations, before the effects of financing decisions (interest) and taxes. Investors use it to compare the operational performance of different companies in the same sector, regardless of their capital structure or tax situations.
Calculation: EBIT = Revenue - COGS - Operating Expenses.
Example: A company has revenue of ₹2 Crore, COGS of ₹50 Lakhs, and operating expenses of ₹80 Lakhs. Its EBIT is ₹70 Lakhs.