Earnings Before Interest & Tax - EBIT

An indicator of a company's profitability, calculated as revenue minus expenses, excluding tax and interest. EBIT is also referred to as "operating earnings", "operating profit" and "operating income", as you can re-arrange the formula to be calculated as follows:

Investopedia Says:
In other words, EBIT is all profits before taking into account interest payments and income taxes. An important factor contributing to the widespread use of EBIT is the way in which it nulls the effects of the different capital structures and tax rates used by different companies. By excluding both taxes and interest expenses, the figure hones in on the company's ability to profit and thus makes for easier cross-company comparisons.

EBIT was the precursor to EBITDA, which takes the process further by removing two non-cash items from the equation (depreciation and amortization).

Related Links:
This measure may have its benefits, but it can also present earnings through rose-colored glasses. A Clear Look At EBITDA
Find out the benefits of using EBITDA to analyze profitability and the dangers of using it as a measure of cash flow. EBITDA: The Good, The Bad, And The Ugly
Learn how to use revenue and expenses, among other factors, to break down and analyze a company. Understanding The Income Statement
Take a deeper look at a company's profitability with the help of profit-margin ratios. The Bottom Line On Margins
Learn what it means to do your homework on a company's performance and reporting practices before investing. Advanced Financial Statement Analysis

The difference between the revenues of a business and the related costs and expenses, excluding income derived from sources other than its regular activities and before income deductions; synonymous with net operating profit (or loss), operating income (or loss), and net operating income (or loss). Income deductions are a class of items comprising the final section of a company's income statement, which, although necessarily incurred in the course of business and customarily charged before arriving at net income, are more in the nature of costs imposed from without than costs subject to the control of everyday operations. They include interest; amortized discount and expense on bonds; income taxes; losses from sales of plants, divisions, major items of property; prior-year adjustments; charges to contingency reserves; bonuses and other periodic profit distributions to officers and employees: write-offs of intangibles: adjustments arising from major changes in accounting methods, such as inventory valuation and other material and nonrecurrent items. In the wake of the Enron debacle in 2002, Standard & Poor's announced a new definition of operating earnings, whereby restructuring and certain other expenses that are not generally included by many companies in their operating earnings figure will be included, and certain gains will be excluded. Two controversial examples: Pension gains are excluded from core earnings by the S&P definition while employee stock-option costs are included. In several highly publicized cases, earnings have been inflated by exaggerated returns on pension fund investments and executive compensation not reflected as an expense.

Difference between the revenues of a business and the related costs and expenses, excluding income or expenses from sources other than its regular activities and before income deductions; synonymous with net operating profit (loss), operating income (loss), and net operating income (loss). It does not reflect financing expenses, income taxes, or certain other expenses.