Financial StatementsIntermediate

EBIT

Operating profit

Profit from operations before interest and tax.

Detailed explanation

EBIT is EBITDA minus depreciation and amortisation. It reflects the cost of using up assets, which EBITDA ignores.

Formula

EBIT = Revenue − Operating expenses − Depreciation & amortisation

Example

EBITDA ₹100 cr − D&A ₹20 cr = EBIT ₹80 cr.

Why it matters

Used for interest coverage and return on capital employed (ROCE).

Key points

  • Interest coverage = EBIT ÷ Interest.
  • Basis for ROCE.
  • Excludes financing decisions.

Related terms

EBITDAROCEInterest Coverage Ratio

More in Financial Statements

Income StatementRevenueCost of Goods SoldGross MarginEBITDAOperating Margin

Educational content only. Definitions and examples are illustrative and are not investment, tax or legal advice.