EBIT = total revenue − cost of sales − operating expenses.

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EBIT and EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization): The main difference between EBIT and EBITDA is that EBITDA excludes amortization and depreciation, while EBIT includes them.
Amortization and net profit: Net profit includes all income and expenses, including interest, taxes, depreciation and amortization.
EBIT formula and calculation
The calculation of EBIT is relatively simple and is based on the revenue generated by the company's business operations. Its formula for calculating EBIT is:


Interpretation of EBIT:

Positive EBIT: Indicates that the company is generating profits from its operations. It is a positive sign that the company is able to cover its operating costs and still generate a profit.
Negative EBIT: This is usually a warning sign, as it indicates that the company is not generating enough revenue to cover its operating costs.
This could lead to financial problems if corrective action is not taken.

Practical example:

Suppose a company has operating revenues of €1,000,000 and operating costs of €600,000. Its EBIT would be €400,000, indicating healthy operating profitability.

Factors influencing EBIT
Several factors, both internal and external, can influence a company's EBIT:

Internal factors:

Operational efficiency: Improving efficiency in production or service delivery can reduce operating costs and increase EBIT.
Production costs: Controlling production costs is crucial to maintaining a robust EBIT. An increase in costs without a corresponding increase in sales prices can reduce EBIT.
External factors:

Economic situation: An economy in recession can reduce demand for products list of new zealand cell phone number or services, which negatively affects operating income and, therefore, EBIT.
Regulatory changes: New regulations that increase operating costs may decrease EBIT and EBITDA.
Examples

If a company relies heavily on raw materials whose price fluctuates on the market, these variations can directly impact its EBIT. Similarly, changes in tax laws or industry regulations can influence operating costs and therefore EBIT. For example, oil prices fell from around €100 in 2012 to around €20 in 2015. This drastic drop may have significantly reduced operating income for companies in the energy sector, significantly affecting their EBIT.

EBIT in different industries
EBIT can vary significantly between industries due to different cost structures, levels of competition and business models. For example: