This earnings before interest & taxes template helps you calculate enterprise value, EBIT and the EV/EBIT ratio.
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EBIT stands for Earnings Before Interest and Taxes and is one of the last subtotals in the income statement before net income. EBIT is also sometimes referred to as operating income and is called this because it’s found by deducting all operating expenses (production and non-production costs) from sales revenue.
Dividing EBIT by sales revenue results in the operating margin, expressed as a percentage (i.e. 15% operating margin). This margin can be compared to the firm’s past operating margins, the firm’s current net profit margin and gross margin, or the margins of other firms in the same industry.
Earnings Before Interest and Taxes can be calculated in two ways. The first is starting with EBITDA and then deducting depreciation and amortization. Alternatively, if a company does not use the EBITDA metric, operating income can be found by subtracting SG&A (excluding interest but including depreciation) from gross profit.
Here are the two EBIT formulas:
EBIT = Net Income + Interest + Taxes
EBIT = EBITDA – Depreciation and Amortization Expense
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