How to Calculate EBIT - Tutorial, Definition, Formula, Example

Definition:

In finance, earnings before interest and taxes, is a measure of an company's benefit that precludes interest and income tax expenses. EBIT is the difference between working incomes and working liabilities.

Example :

A company has sales of $500000 with operating costs of $400000. Calculate the Earnings Before Interest and Taxes (EBIT).

Given :

Sales Revenue (R) = $500000 Operating Expenses (E) = $400000

To Find :

Earnings Before Interest and Taxes

Solution :

EBIT = R - E = $500000 - $400000 = $100000