EBIT

EBIT stands for "Earnings Before Interest and Taxes". This metric measures a company's operating profitability independently of its financing structure and tax burden. It shows how profitable the core business is and is therefore one of the most important figures in company analysis and in M&A transactions.

EBIT is calculated by deducting operating expenses including depreciation from revenue, or, starting from net income, by adding back taxes and interest expense. In contrast to EBITDA, EBIT accounts for depreciation and amortisation and therefore reflects the consumption of fixed assets, which makes it more sensitive to capital intensity.

In practice, EBIT serves as a basis for valuation multiples and for deriving the enterprise value. When preparing a company sale, we normalise EBIT for one-off effects in order to depict the sustainable earning power correctly.