EBIT Calculator

This is an online EBIT calculator that helps you calculate the earnings before interest and taxes (abbreviated as EBIT).

Earnings before interest and taxes (also known as Operating Profit) is an indicator of a company’s profitability that includes all incomes and expenses (operating and non-operating) except interest expenses and income tax expenses. In other words, EBIT removes the expenses encountered in tax and interest in order to provide a base number for the earnings.

For businesses looking to attract investors or potential buyers, the EBIT can provide an indication of the company’s earning potential. To calculate EBIT, expenses (e.g. the cost of goods sold, selling and administrative expenses) are subtracted from revenues. Net income is later obtained by subtracting interest and taxes from the result.

Calculating EBIT

There are two different formulas for calculating EBIT.

• Revenue – Operating expenses, or

• Net income + Interest + Tax

EBIT Example

Suppose:

• Revenue = 5m
• Cost of sales = 2m
• Administrative expenses = 1m

EBIT is:

• 5 – 2 – 1 = 2m