EBIT

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Definition

EBIT is an acronym for earnings before interest and taxes.

EBIT is a common measurement of the earning power of a company. Because it excludes taxes, it helps an investor to look at the value of ongoing operations irrespective of the country in which it operates or the amount of debt a company uses to finance its operations, since it is not distorted by marginal tax rates or debt tax shields. Further, the exclusion of interest expenses allows the investor to compare the earning power of companies regardless of the amount of debt owed (and resulting interest payments).

Formula

EBIT = Net Income + Provision for Income Taxes + Interest Expense

(All expenses are absolute values)

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