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EBIT - Earnings Before Interest & Tax

EBIT is earnings before interest expense and income taxes are taken into consideration. Interest expense should include not only interest but also any amortization of debt issuance expenses. For larger companies, income/loss from minority interests and discontinued operations should be considered. EBIT analyzes the operational profitability of a company. EBIT nullifies the effect of managements capital structure and tax rates. By excluding both taxes and interest expenses, EBIT provides the analyst the method to make cross-company comparisons.

Example - This financial statement from GE provides a nice example of EBIT calculations.

PERIOD ENDING	31-Dec-08	31-Dec-07	31-Dec-06
Total Revenue	182,515,000	172,738,000	163,391,000
Cost of Revenue	83,772,000	73,125,000	74,110,000
Gross Profit	98,743,000	99,613,000	89,281,000
Operating Expenses	-	-	-
Selling General and Administrative	42,021,000	40,297,000	40,628,000
Others	-	-	3,839,000
Operating Income or Loss	56,722,000	59,316,000	44,814,000
Total Other Income/Expenses Net	(10,731,000.00)	(8,015,000.00)	-
Earnings Before Interest And Taxes	45,350,000	50,385,000	43,906,000
Interest Expense	26,209,000	23,787,000	19,286,000
Income Before Tax	19,141,000	26,598,000	24,620,000
Income Tax Expense	1,052,000	4,130,000	3,954,000
Minority Interest	(641,000.00)	(916,000.00)	(908,000.00)
Net Income From Continuing Ops	18,089,000	22,468,000	20,666,000
Non-recurring Events
Discontinued Operations	(679,000.00)	(260,000.00)	163,000
Extraordinary Items	-	-	-
Effect Of Accounting Changes	-	-	-
Other Items	-	-	-
Net Income	17,410,000	22,208,000	20,829,000