Equity · Core
EBIT
EBIT is earnings before interest and tax — operating profit after depreciation, before capital structure and the tax man.
Definition
EBIT is usually operating income: revenue minus cash opex and D&A. Unlike EBITDA it treats depreciation as a cost. Interest and tax sit below. One-offs and equity income can make ‘operating’ a negotiation.
Why it matters
Interest-coverage and unlevered return metrics need a profit number above financing. EBIT is the usual numerator for that.
Case
Two firms with identical EBITDA diverge on EBIT if one is asset-heavy. The heavy firm’s EBIT is the more honest operating claim if the assets must be replaced.
How to read it
Check whether D&A is economic. Then compare EBIT to capex and to interest expense — coverage first, multiple second.
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