How to Analyze EBIT

To analyze EBIT means to analyze the actual profitability of any company. EBIT means earning before interest and taxes. We know that net profit is the difference between total incomes and total expenses. So, in the company, we deduct both interest and expenses. But interest and tax payments should be excluded for comparing the profitability level of two or more companies because different companies pay interest and tax at different rates. So, better is to add the interest and tax back to the net profit.

Following is the Simple Formula of EBIT

= NET PROFIT + Interest + Taxes

We can also say EBIT as net operating income because because we try to best to include only operating income and operating expenses in it. So, its relationship will be with sales and operating expenses only. If sales level will increase EBIT will increase.

Now, we Analyze EBIT. There are two main points of Analysis of EBIT :

1. Compare the Profitability of Two or More Companies 

For example, there are two companies A and B. Suppose A company's EBIT is $ 45000 and B company's EBIT is $ 50,000. Company B will be better than company A because company b is getting more return from his operation. So, to invest in b company is better for a new investor. Company A should listen the techniques of company b for decreasing the cost of operation and increasing the sale.

2. Choose the Best Option for Getting New Fund

For example, a company wants to get $50,000 for business promotion. There are three option for this. Company can

 a) Issue new equity shares shares

 b) Company can issue new preference shares

 c) Company can get loan by issuing debentures.

 Now, a good finance manager will take this decision after analysis EBIT. If EBIT is at good level, to get debt will be cheap from taking the fund through issuing new equity or preference shares because we have to give only interest on the debt and our share capital will be same, it means, earning per share will be maximum.







access account accountant Accounting accounting definitions accounting ebook Accounting education accounting procedure accounting process outsourcing Accounting Software advance advertising africa Amalgamation amendments announcements Annuity assets audit auditing Australia B.Com. balance sheet bank Bank reconciliation banking basic accounting BBA benefits best bill black money blog bloggers book keeping bookkeeping Branch Accounting - full tutorial budget Budget variance business businessman CA calculator canada capital capital budgeting career cash cash book cash flow statement Chiense children china class coaching coins college commerce commerce students company computer computer accounting conference Contact vinod kumar Control Your Spending corporate accounting cost cost accounting cost center cost centre CPA credit credit card cs currency data Debit and credit debit cards debt debtor degree depletion depreciation Diwali Messages documents dollar domain Downloads Dubai e-accounting earning education Education Loans email employee EPF ERP euromoney examination excel excise duty expenses facebook factor of loan fans feature fifo FII fiji finacle finance Financial financial accounting fire insurance flickr flow forensic forex formula france fraud free fun function fund GAAP GDP gdr germany gold goodwill goodwill accounting google google apps Google Adsense google apps google base google buzz google calendar Google docs google finance google fusion tables google talk govt. GST guide health Hindi Hindi Language history holding company How to treat FBT in Tally 9 HRA ICAI ICAWI ICICI Bank IFRS income income statement Income Tax India indian railway Indonesia inflation inflation accounting infographics information inspiration insurance insurance accounting Intangible interest international Internet Introduction of Tally 9 inventory investment investment in Shares invoice IT Japan Job costing journal entries Journal Entries eBook Help Kalculate keyboard kindle kuwait laptop law LBT learning lease lecture ledger leducation Leverage Analysis liabilities lifo linkedin loan logical point loss loss of profit M.Com. m.phil malaysia management accounting manual accounting manufacturing account market marketing mastercard material MBA MCA media migration mobile money ms word ms. excel multi currency in tally 9 Multicurrency Accounting mutual fund national security new and sacrifice ratio new york times new zealand news NGO nonprofit-accounting North Georgia Mountains NPV NSE odbc office oman online application online accounting Online Accounting Course otcei pakistan parents Partnership pay pal pdf Personal Finance pie chart pie chart of income pnb podcast ppf presentation price privacy policy prize money prof. vinod kumar profit profit and loss account project management provision purchase puzzles quickbooks Quote quotes quotes of svtuition rating agency ratio analysis RBI readers real estate rectification of errors remote control reports reserves responsibility accounting retirement revenue Revenue reserves review risk rupees salary sale saudi arabia saving sbi scholarship school SEBI security service tax share share trading Shares shri lanka singapore sms social accounting society solution South Africa stock stock exchange structure student students study subsidiary company svtuition swiss bank tally tally 9 Tally 7.2 Tally 9 Tally.ERP 9 tanzania tax Tax Accounting TDS teacher teaching technology test testimonial testimonials thailand tips trading trading on equity transaction trend trial balance truthfulness tuition twitter UAE UGC - NET Commerce UK United Arab Emirates university usa valuation VAT Video Voucher and vouching Wealth wikipedia working capital youtube
Accounting Education: How to Analyze EBIT
How to Analyze EBIT
Accounting Education
Not found any lecture VIEW ALL Continue reading Reply Cancel reply Delete By Home PAGES Lectures View All RECOMMENDED FOR YOU Category ARCHIVE SEARCH ALL Lectures Not found any lecture match with your request, please help to write it and send it to our email at for making this website free accounting and finance encyclopedia. Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS CONTENT IS PREMIUM Please share to unlock