EBIT vs. EBITDA

EBIT vs. EBITDA: Know the Difference

1️⃣ EBIT

(Earnings Before Interest and Taxes)

→ Focuses on a company's core profitability without financing effects.

→ Assesses operational efficiency and performance.

→ Operating profit excluding interest and taxes.

→ Common in capital-intensive industries.

→ Reflects profit from core operations.

2️⃣ EBITDA

(Earnings Before Interest, Taxes, Depreciation, and Amortization)

→ Evaluates cash-generating ability and overall performance.

→ Emphasizes cash-generating ability excluding non-cash expenses.

→ Popular in industries with high asset use and significant depreciation.

→ Operating performance including interest, taxes, depreciation, and amortization.

→ Provides a broader view of cash-generating ability excluding non-cash expenses.

Understanding these metrics is crucial for assessing a company's financial performance.

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