Earnings Before Tax Template
This earnings before tax template shows you how to calculate the earnings before tax using line items in the income statement.
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Earnings before tax (EBT), or pre-tax income, is the last subtotal found in the income statement Income StatementThe Income Statement (or Statement of Profit and Loss) shows performance from operations of a business. The financial statement begins with revenues andbefore the penultimate net incomeNet IncomeNet Income is a key line item, not only in the income statement, but in all three core financial statements. While it is arrived at through the income statement, the net profit is also used in both the balance sheet and the cash flow statement. line item. Earnings before tax is found after all deductions have been made against sales revenueSales RevenueSales revenue is the starting point of the income statement. Sales or revenue is the money earned from the company providing its goods or services, income. These deductions include COGS, SG&ASG&ASG&A includes all non-production expenses incurred by a company in any given period. This includes expenses such as rent, advertising, marketing, accounting, litigation, travel, meals, management salaries, bonuses, and more. On occasion, it may also include depreciation expense, depreciationDepreciation ExpenseDepreciation expense is used to reduce the value of plant, property, and equipment to match its use, and wear and tear over time. Depreciation expense is used to better match the expense of a long-term asset to the revenue it generates. and amortization, and interest expense.Interest ExpenseInterest expense arises out of a company that finances through debt or capital leases. Interest is found in the income statement, but can also be calculated through the debt schedule. The schedule should outline all the major pieces of debt a company has on its balance sheet, and calculate interest by multiplying the
Earnings Before Tax Formula
There are three formulas that can be used to calculate Earnings Before Tax (EBT):
- EBT = Sales Revenue – COGS – SG&A – Depreciation and Amortization
- EBT = EBIT – Interest Expense
- EBT = Net Income + Taxes
Earnings Before Tax is used for analyzing the profitability of a company without the impact of its tax regime. This makes companies in different states or countries more comparable, as tax rates may differ significantly across borders. Analysts often prefer to add back taxes so they can have an apples-to-apples comparison of earning power across a wide range of companies.
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