Earnings Before Interest and Taxes (EBIT)

Definition:

Net income before income tax expense and interest expense is deducted. This is a common way to compare the earning power of companies because it eliminates the impact of capital structure and effective tax rates, two non-operating factors.

Examples:

Prudent investors always check the EBIT of a company before investing in them.

The company’s earnings before interest and taxes this year was the highest recorded since the company’s founding in 1932.