EBIT

Category

Income Statement

Units

Currency

Formula

Net Income + Income Tax Expense + Interest Expense

US-GAAP elements

NetIncomeLossIncomeTaxExpenseBenefitInterestExpense

Reference

Non-GAAP measure: Regulation G and Regulation S-K Item 10(e)

Source

Reported in SEC EDGAR filings (US-GAAP XBRL taxonomy)

EBIT, or earnings before interest and taxes, is a company's profit before deducting interest on its debt and income taxes. It is calculated from figures reported in SEC filings, most simply by adding interest expense and income tax expense back to net income.

Removing interest and taxes gives a view of earnings that is largely independent of how a company is financed and where it pays tax. That makes EBIT useful for comparing businesses with very different amounts of debt.

EBIT is not a line item defined by US GAAP, and there is no single XBRL element for it. It is built from reported inputs: net income, tagged NetIncomeLoss; income tax expense, tagged IncomeTaxExpenseBenefit; and interest expense, tagged InterestExpense. GeminIQ takes EBIT from the filing when a company reports it and otherwise derives it as net income plus income tax plus interest expense. When a company presents EBIT in its own earnings materials, it is a non-GAAP measure under Regulation G and Regulation S-K Item 10(e), so it must be reconciled to the most directly comparable GAAP figure, usually net income.

EBIT is often treated as the same thing as operating income, but the two differ. Operating income stops before non-operating items. EBIT built up from net income picks up whatever sits between operating income and pretax income apart from interest, such as investment gains, foreign exchange results, pension costs outside operations, and equity-method income. Some analysts also use interest expense net of interest income, which gives a slightly different figure. Check the definition before comparing EBIT figures from different sources.

EBIT is the numerator in EV/EBIT and in interest coverage, which divides EBIT by interest expense to show how comfortably operating earnings cover debt costs. Unlike EBITDA, EBIT keeps depreciation and amortization as a charge, so it gives capital-intensive businesses less flattering results and better reflects the cost of maintaining their assets.