Earnings Before Interest And Taxes (EBIT)
- First, because it excludes the impact of both tax payments and debt-servicing costs, it provides a more accurate picture of how much cash the business has available to reinvest in its operations or pay out to shareholders in the form of dividends or share buybacks.
- Second, by measuring profitability on a pre-interest basis, it eliminates distortions created by fluctuations in borrowing costs.