Formula
How to Calculate Earnings Before Interest and Taxes (EBIT)
A profitability metric that shows operating earnings before accounting for financing costs and taxes.
Earnings Before Interest and Taxes
EBIT = Revenue - COGS - Operating Expenses
Where
- Revenue
- = Total revenue
- COGS
- = Cost of Goods Sold
- Operating Expenses
- = SG&A, R&D, and other operating costs
What Is Earnings Before Interest and Taxes (EBIT)?
EBIT measures a company's profitability from core operations, excluding interest expenses and tax obligations. It's used to compare operational performance across companies with different capital structures and tax situations.
Worked Example
The SaaS company had $10M in revenue, $7M in operating expenses, yielding $3M EBIT — demonstrating operational profitability even though net income was lower due to interest on venture debt.
Why Earnings Before Interest and Taxes (EBIT) Matters
EBIT helps investors evaluate operational efficiency independent of financing decisions. For late-stage startups approaching profitability, it's a key metric alongside EBITDA.
Related Terms
Frequently Asked Questions
How do you calculate Earnings Before Interest and Taxes (EBIT)?
Earnings Before Interest and Taxes (EBIT) is calculated using the formula: EBIT = Revenue - COGS - Operating Expenses. A profitability metric that shows operating earnings before accounting for financing costs and taxes.
What is a good Earnings Before Interest and Taxes (EBIT)?
What constitutes a "good" Earnings Before Interest and Taxes (EBIT) depends on context — the fund's stage, vintage year, and strategy. Check our benchmarks and calculators for specific ranges.