EBIT Calculator
Enter revenue and operating expenses to see EBIT, the operating margin and how much of revenue goes on expenses.
Updated
EBIT Calculator
Our EBIT Calculator finds earnings before interest and taxes, the profit a business makes from its core operations. Enter revenue and total operating expenses (cost of goods sold, selling and administrative costs, depreciation and amortization) and the result appears as you type, with the operating margin. It suits business owners, investors, analysts and finance students who want to compare how well companies run their operations, whatever their debt or tax position.
Quick answer
EBIT is revenue − operating expenses: 840,000 − 693,000 = 147,000, a 17.5% operating margin.
- Revenue: sales from the main business, before any costs.
- Operating expenses: cost of goods sold, selling and admin costs, plus depreciation and amortization.
- Left out: interest on debt and income taxes, which come after EBIT.
- Can be negative: an operating loss, when expenses are larger than revenue.
What Is EBIT?
EBIT stands for earnings before interest and taxes. It is the profit left from operations once every operating cost has been paid, but before the business pays interest to lenders or tax to the government:
= Revenue
− Operating expenses
Because it ignores how a business is financed and where it pays tax, EBIT lets you compare the operating performance of companies with very different debt levels and tax rates. It is often called operating income or operating profit, although some companies report extra non-operating items that make the two figures differ slightly.
How to Calculate EBIT
= 840,000 − 693,000
= 147,000
- Find revenue. Take net sales from the income statement, such as 840,000.
- Add up operating expenses. Cost of goods sold 504,000, selling and admin costs 147,000 and depreciation 42,000 make 693,000.
- Subtract. 840,000 − 693,000 = 147,000 is EBIT.
- Find the margin (optional). 147,000 ÷ 840,000 × 100 = 17.5% operating margin.
Top-Down and Bottom-Up EBIT Formulas
You can reach EBIT from the top of the income statement or work back up from the bottom. Both give the same answer:
| Method | Example |
|---|---|
| Top-down: revenue − COGS − operating expenses | 840,000 − 504,000 − 189,000 = 147,000 |
| Bottom-up: net income + interest + taxes | 92,000 + 18,000 + 37,000 = 147,000 |
Here 189,000 is selling and admin costs of 147,000 plus depreciation of 42,000. Use the bottom-up route when a report shows net income, interest expense and the tax charge but not a full expense breakdown.
EBIT Examples
| Revenue − Expenses | EBIT (margin) |
|---|---|
| 840,000 − 693,000 | 147,000 (17.5%) |
| 1,200,000 − 1,020,000 | 180,000 (15%) |
| 64,000 − 64,000 | 0 (0%) |
| 310,000 − 352,000 | −42,000 (−13.55%) |
The second business earns more EBIT than the first but keeps a smaller share of each sale. The third breaks even at the operating level, and the fourth makes an operating loss of 42,000 before any interest or tax is paid.
EBIT vs EBITDA vs Net Income
The same business, read at four points on its income statement:
| Measure | Value |
|---|---|
| EBITDA (EBIT + depreciation) | 189,000 |
| EBIT | 147,000 |
| EBT (EBIT − interest) | 129,000 |
| Net income (EBT − taxes) | 92,000 |
EBITDA adds back depreciation and amortization, so it is closer to operating cash flow. EBIT keeps them, which makes it a better guide for businesses that must keep replacing equipment. Net income is what is left for owners after lenders and the tax office are paid.
What EBIT Is Used For
- Operating margin. EBIT ÷ revenue × 100 shows how much of each sale is operating profit (17.5% above).
- Interest coverage. EBIT ÷ interest expense shows how easily debt is serviced: 147,000 ÷ 18,000 ≈ 8.17 times.
- Valuation. Analysts compare enterprise value with EBIT (EV/EBIT) to price a business apart from its debt.
- Comparing companies. Two firms with different loans or tax rates can be compared on equal terms.
- Tracking performance. EBIT growth shows whether the core business is improving, not just the financing.
Common Mistakes
- Subtracting interest or taxes. They come after EBIT; including them gives EBT or net income instead.
- Leaving out cost of goods sold. Operating expenses here means all operating costs, COGS included.
- Forgetting depreciation and amortization. Leaving them out gives EBITDA, not EBIT.
- Counting one-off gains. A profit on selling a building is not part of the core operation.
- Mixing periods. Take revenue and expenses from the same year or quarter.
Key Terms
- Revenue
- Income from selling goods or services, before any costs.
- COGS
- Cost of goods sold: the direct cost of making or buying what was sold.
- Operating expenses
- All costs of running the business, including depreciation and amortization.
- Operating margin
- EBIT as a percentage of revenue.
- EBITDA
- EBIT with depreciation and amortization added back.
- EBT
- Earnings before tax: EBIT minus interest expense.
How to Use the EBIT Calculator
- Enter revenue. Type the net sales for the period, such as 840,000. Commas and a currency sign are fine.
- Enter operating expenses. Type the total of cost of goods sold, selling and admin costs, depreciation and amortization, such as 693,000. Leave out interest and taxes.
- Read and copy the result. EBIT appears as you type, with the working, the operating margin, the expense share of revenue and a bar showing expenses against EBIT. Press Copy to copy it, or Clear or Esc to start again.
Example: revenue of 1,200,000 and operating expenses of 1,020,000. EBIT is 180,000, from 1,200,000 − 1,020,000, an operating margin of 15%.
Who Can Use This Calculator?
Frequently Asked Questions (FAQs)
How do you calculate EBIT?
Subtract operating expenses from revenue. EBIT = revenue − operating expenses, where operating expenses include cost of goods sold, selling and admin costs, and depreciation and amortization, but not interest or taxes.
What is the EBIT for revenue of 840,000 and operating expenses of 693,000?
It is 147,000. 840,000 − 693,000 = 147,000, an operating margin of 17.5%.
How do you calculate EBIT from net income?
Add interest expense and income taxes back to net income. For example, 92,000 + 18,000 + 37,000 = 147,000.
Is EBIT the same as operating income?
Usually, yes. Both measure profit from operations before interest and taxes. They can differ slightly when a company includes non-operating income, such as a one-off gain, in EBIT.
What is the difference between EBIT and EBITDA?
EBITDA adds depreciation and amortization back to EBIT. With EBIT of 147,000 and depreciation of 42,000, EBITDA is 189,000.
Can EBIT be negative?
Yes. When operating expenses are larger than revenue the business has an operating loss. For example, 310,000 − 352,000 = −42,000.
What is a good EBIT margin?
It depends on the industry. Software firms often run high margins while grocers and retailers run thin ones, so compare a business with its own past results and with close competitors.
Is the EBIT Calculator free?
Yes. It is completely free, needs no sign-up, and can be used as many times as you like.
Sources
- Wikipedia. Earnings before interest and taxes.
- Wall Street Prep. EBIT: formula and calculator.
- Wall Street Prep. EBIT vs EBITDA: comparative analysis and differences.
- WallStreetMojo. EBIT: what it is, formula, components and examples.
Try our EBIT Calculator to see your operating profit and margin in seconds.