Earnings Before Interest and Tax (EBIT)

When trying to estimate the profits of a company, investment analysts are always trying to get to a 'true' figure. By using Earnings Before Interest and Tax (EBIT) rather than a measure like Gross Profit you can include all the operating expenses of actually running the business but exclude charges which the company has little control over.

For example, the tax rules are not a factor in driving the business and the company can only abide by them. Similarly the interest on borrowings does not drive the business. The company has little influence over the interest rate once it has been negotiated and set.

A figure such as Gross Profit includes all company expenses (yet to be subtracted) whether the company can control them or not, so perhaps does not represent the true strength of the company in the way the EBIT does. EBIT is also known as Operating Profit.

What to do if you need more help

If you need more help with your specific commercial loan, mortgage or insurance requirement please speak to a professional financial adviser.

We hope you found this information useful.

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