income minus costs revenue minus the cost of goods sold and normal operating expenses.
Related definitions of "EBIT"
- Full form earnings before interest and taxes
Interest coverage is expressed as a ratio, and reflects a company’s ability to pay the interest obligations on its debt. It compares the funds available to pay interest—earnings before interest and taxes, or EBIT—with the interest expense. The basic formula is:
Let us look at a simple firm with earnings before interest and tax (EBIT) of 100, borrowings of 400 (all on a floating rate), an interest rate of 6% (as a base case), and a tax rate of 30%, and apply some of these techniques.
By Will Spinney
EBITDA—an acronym that stands for “earnings before interest, taxes, depreciation, and amortization”—is slightly less inclusive than “EBIT”—earnings before interest and taxes. Both focus on profitability, and have gained popularity in the past decade as measures of operating success
To calculate the interest coverage ratio, a company’s operating income (also known as earnings before interest and taxes, or EBIT) is divided by its interest charges over a defined period, typically a quarter or half-year. Sometimes, EBITDA (where DA is depreciation and amortization) is used instead
Definitions of ’EBIT’ and meaning of ’EBIT’ are from the book publication, QFINANCE – The Ultimate Resource, © 2009 Bloomsbury Information Ltd. Find definitions for ’EBIT’ and other financial terms with our online QFINANCE Financial Dictionary.