EBIT stands for earnings before interest and taxes. It measures profit before financing costs and income taxes, making it useful for comparing operating results among companies with different debt loads or tax situations.
A simple calculation starts with net income and adds back interest expense and income tax expense, with adjustments where the reported figures require them. EBIT is often similar to operating income, but the two are not necessarily identical because non-operating items may be included.
EBIT is not cash flow. It can include noncash expenses and does not show capital expenditure, debt repayments or changes in working capital. Companies may also publish 'adjusted EBIT' figures that remove selected costs, so the precise reconciliation matters.
Use EBIT with revenue, margins, cash flow and an explanation of any adjustments. For comparisons, choose a consistent definition across the businesses rather than relying on one unexplained number.