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Earnings before interest and taxes (EBIT) |
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Definition of Earnings before interest and taxes (EBIT)Earnings before interest and taxes (EBIT)A financial measure defined as revenues less cost of goods sold Earnings before interest and taxes (EBIT)The operating profit before deducting interest and tax.
Related Terms:Earnings before interest, taxes, depreciation and amortization (EBITDA)The operating profit before deducting interest, tax, depreciation and amortization. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)An earningsbased measure that, for many, serves as a surrogate for cash flow. Actually consists of working fractional interest discountthe combined discounts for lack of control and marketability. g the constant growth rate in cash flows or net income used in the ADF, Gordon model, or present value factor. Accounting earningsearnings of a firm as reported on its income statement. Accrued interestThe accumulated coupon interest earned but not yet paid to the seller of a bond by the Amortizing interest rate swapSwap in which the principal or national amount rises (falls) as interest rates Asymmetric taxesA situation wherein participants in a transaction have different net tax rates. Base interest rateRelated: Benchmark interest rate. Before-tax profit marginThe ratio of net income before taxes to net sales. Benchmark interest rateAlso called the base interest rate, it is the minimum interest rate investors will Best-interests-of-creditors testThe requirement that a claim holder voting against a plan of reorganization Capitalized interestinterest that is not immediately expensed, but rather is considered as an asset and is then Cash flow after interest and taxesNet income plus depreciation. Compound interestinterest paid on previously earned interest as well as on the principal. Covered interest arbitrageA portfolio manager invests dollars in an instrument denominated in a foreign Deferred taxesA non-cash expense that provides a source of free cash flow. Amount allocated during the EarningsNet income for the company during the period. Earnings per share (EPS)EPS, as it is called, is a company's profit divided by its number of outstanding Earnings retention ratioPlowback rate. Earnings surprisesPositive or negative differences from the consensus forecast of earnings by institutions Earnings yieldThe ratio of earnings per share after allowing for tax and interest payments on fixed interest Economic earningsThe real flow of cash that a firm could pay out forever in the absence of any change in Effective annual interest rateAn annual measure of the time value of money that fully reflects the effects of Equilibrium rate of interestThe interest rate that clears the market. Also called the market-clearing interest Forward interest rateinterest rate fixed today on a loan to be made at some future date. Fully diluted earnings per sharesearnings per share expressed as if all outstanding convertible securities Gross interestinterest earned before taxes are deducted. InterestThe price paid for borrowing money. It is expressed as a percentage rate over a period of time and Interest coverage ratioThe ratio of the earnings before interest and taxes to the annual interest expense. This Interest coverage testA debt limitation that prohibits the issuance of additional long-term debt if the issuer's Interest equalization taxTax on foreign investment by residents of the U.S. which was abolished in 1974. Interest paymentsContractual debt payments based on the coupon rate of interest and the principal amount. Interest on interestinterest earned on reinvestment of each interest payment on money invested. Interest-only strip (IO)A security based solely on the interest payments form a pool of mortgages, Treasury Interest rate agreementAn agreement whereby one party, for an upfront premium, agrees to compensate the Interest rate capAlso called an interest rate ceiling, an interest rate agreement in which payments are made Interest rate ceilingRelated: interest rate cap. Interest rate floorAn interest rate agreement in which payments are made when the reference rate falls Interest rate on debtThe firm's cost of debt capital. Interest rate parity theoreminterest rate differential between two countries is equal to the difference Interest rate riskThe risk that a security's value changes due to a change in interest rates. For example, a Interest rate swapA binding agreement between counterparties to exchange periodic interest payments on Interest subsidyA firm's deduction of the interest payments on its debt from its earnings before it calculates Interest tax shieldThe reduction in income taxes that results from the tax-deductibility of interest payments. Low price-earnings ratio effectThe tendency of portfolios of stocks with a low price-earnings ratio to Nominal interest rateThe interest rate unadjusted for inflation. Open interestThe total number of derivative contracts traded that not yet been liquidated either by an Pooling of interestsAn accounting method for reporting acquisitions accomplished through the use of equity. Preauthorized electronic debits (PADs)Debits to its bank account in advance by the payer. The payer's Price/earnings ratio (PE ratio)Shows the "multiple" of earnings at which a stock sells. Determined by dividing current Rate of interestThe rate, as a proportion of the principal, at which interest is computed. Real interest rateThe rate of interest excluding the effect of inflation; that is, the rate that is earned in terms Retained earningsAccounting earnings that are retained by the firm for reinvestment in its operations; Short interestThis is the total number of shares of a security that investors have borrowed, then sold in the Simple interestinterest calculated only on the initial investment. Related:compound interest. Spot interest rateinterest rate fixed today on a loan that is made today. Related: forward interest rates. Stated annual interest rateThe interest rate expressed as a per annum percentage, by which interest Times-interest-earned ratioearnings before interest and tax, divided by interest payments. True interest costFor a security such as commercial paper that is sold on a discount basis, the coupon rate Earnings per share of common stockHow much profit a company made on each share of common stock this year. RETAINED EARNINGSProfits a company plowed back into the business over the years. Last January’s retained earnings, plus the net income or profit that a company made this year (which is calculated on the income statement), minus dividends paid out, equals the retained earnings balance on the balance sheet date. InterestThe cost of money, received on investments or paid on borrowings. Profit before interest and taxes (PBIT)See ebit. DebitOne side of a journal entry, usually depicted as the left side. Interest incomeIncome that a company receives in the form of interest, usually as the result of keeping money in interest-bearing accounts at financial institutions and the lending of money to other companies. Interest payableThe amount of interest that is owed but has not been paid at the end of a period. Payroll taxes payableThe amount of payroll taxes owed to the various governments at the end of a period. Retained earningsThe residual earnings of the company. Statement Retained EarningsOne of the basic financial statements; it takes the beginning balance of retained earnings and adds net income, then subtracts dividends. The Statement of Retained earnings is prepared for a specified period of time. basic earnings per share (EPS)This important ratio equals the net diluted earnings per share (EPS)This measure of earnings per share earnings before interest and income tax (EBIT)A measure of profit that earnings per share (EPS)See basic earnings per share and diluted earnings per share. net income (also called the bottom line, earnings, net earnings, and netoperating earnings) price/earnings ratio (price to earnings ratio, P/E ratio, PE ratio)This key ratio equals the current market price times interest earnedA ratio that tests the ability of a business to make Accrued InterestThe amount of interest accumulated on a debt security between Basic Earnings Power RatioPercentage of earnings relative to total assets; indication of how Compound Interestinterest paid on principal and on interest earned in previous Earnings per ShareA measure of the earnings generated by a company on a per Effective Interest RateThe rate of interest actually earned on an investment. It is Nominal Interest RateThe rate of interest quoted, or stated, to be paid on a security Price to Earnings Ratio (P/E, PE Ratio)A measure of how much investors are willing to pay for each dollar Real Interest RateThe rate of interest paid on an investment adjusted for inflation Simple Interestinterest paid only on the principal; calculated by multiplying the Times Interest Earned RatioA measure of how well a company is able to meet its interest compound interesta method of determining interest in which interest that was earned in prior periods is added to the original investment so that, in each successive period, interest is earned on both principal and interest simple interesta method of determining interest in which interest is earned only on the original investment (or principal) amount InterestThe cost of funds loaned to an entity. It can also refer to the equity ownership Pooling of interestsAn method for accounting for a business combination. When used, the expenses of the combination are charged against income at once, and the net Retained earningsA company’s accumulated earnings since its inception, less any distributions to shareholders. Statement of retained earningsAn adjunct to the balance sheet, providing more detailed information about the beginning balance, changes, and ending balance in compound interestinterest earned on interest. effective annual interest rateinterest rate that is annualized using compound interest. interest rate parityTheory that forward premium equals interest rate differential. interest tax shieldTax savings resulting from deductibility of interest payments. nominal interest rateRate at which money invested grows. price-earnings (P/E) multiple (ratio)Ratio of stock price to earnings per share.
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