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Earnings Before Interest After Taxes (EBIAT)

What is 'Earnings Before Interest After Taxes - EBIAT'

Earnings before interest after taxes (EBIAT) is a financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT, measures a company's profitability without taking into account the capital structure, like ratios such as debt to equity. EBIAT measures a company's ability to generate income from its operations for a specified time period.

Earnings Before Interest After Taxes Calculation and Example

The calculation for EBIAT is very straightforward. It is the company's EBIT x (1 - Tax rate). A company's EBIT is calculated in the following way:

Explaining 'Earnings Before Interest After Taxes - EBIAT'

Earnings Before Interest After Taxes (ebiat) FAQ

Are earnings before or after taxes?

Earnings typically are after-tax net income, sometimes known as the bottom line or a company's profits.

How do you calculate after tax EBIT?

Calculate earnings before interest and taxes by starting with the gross profit. Subtract operating costs from the gross profits. When calculating EBIT, do not subtract the cost of business capital and tax liabilities because they are not included in the interest expense and taxes.

Is EBIT the same as pre tax income?

There is no difference between earnings before tax (EBT) vs pretax income. Both terms have the same meaning and can be interchanged.

Why do we subtract depreciation in the calculation of EBIT?

EBIT is a company's operating profit without interest expense and taxes. However, EBITDA or (earnings before interest, taxes, depreciation, and amortization) removes depreciation, and amortization expenses from EBIT when calculating profitability. Therefore, depreciation expense reduces profitability.

Why is Ebitda so important?

EBITDA is essentially net income (or earnings) added to interest, taxes, depreciation, and amortization. EBITDA analyzes and compares profitability among companies and industries, eliminating the effects of financing and capital expenditures.

What is a healthy Ebitda?

The enterprise value (EV) to the earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio varies by industry. The average EV/EBITDA for the S&P 500 was 14.20. Generally, analysts and investors see an EV/EBITDA value below 10 as healthy and above average.

Further Reading


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www.jstor.org [PDF]
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link.springer.com [PDF]
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Tests of the efficiency performance of conglomerate firmsTests of the efficiency performance of conglomerate firms
onlinelibrary.wiley.com [PDF]
… The ratio of economic profits to economic assets gives the economic rate of profit. We start by assuming a firm in steady-state growth, with assets, knowledge, and earnings all growing at the … and the year-end stock, are the same for both before-tax and after-tax income, while the …

Capital cash flows: a simple approach to valuing risky cash flowsCapital cash flows: a simple approach to valuing risky cash flows
www.jstor.org [PDF]
… The ratio of economic profits to economic assets gives the economic rate of profit. We start by assuming a firm in steady-state growth, with assets, knowledge, and earnings all growing at the … and the year-end stock, are the same for both before-tax and after-tax income, while the …

Corporate growth and risk around the worldCorporate growth and risk around the world
books.google.com [PDF]
… The ratio of economic profits to economic assets gives the economic rate of profit. We start by assuming a firm in steady-state growth, with assets, knowledge, and earnings all growing at the … and the year-end stock, are the same for both before-tax and after-tax income, while the …

Financial Evaluation of An Offshore Drilling Rig VentureFinancial Evaluation of An Offshore Drilling Rig Venture
www.onepetro.org [PDF]
… The ratio of economic profits to economic assets gives the economic rate of profit. We start by assuming a firm in steady-state growth, with assets, knowledge, and earnings all growing at the … and the year-end stock, are the same for both before-tax and after-tax income, while the …

Assessment of Firms' Financial Performances in Contemporary Economy: a Value-based ApproachAssessment of Firms' Financial Performances in Contemporary Economy: a Value-based Approach
papers.ssrn.com [PDF]
… The ratio of economic profits to economic assets gives the economic rate of profit. We start by assuming a firm in steady-state growth, with assets, knowledge, and earnings all growing at the … and the year-end stock, are the same for both before-tax and after-tax income, while the …



Q&A About Earnings Before Interest After Taxes (EBIAT)


Are earnings before or after taxes?

Earnings typically are after-tax net income, sometimes known as the bottom line or a company's profits.

How do you calculate after tax EBIT?

Calculate earnings before interest and taxes by starting with the gross profit. Subtract operating costs from the gross profits. When calculating EBIT, do not subtract the cost of business capital and tax liabilities because they are not included in the interest expense and taxes.

Is EBIT the same as pre tax income?

There is no difference between earnings before tax (EBT) vs pretax income. Both terms have the same meaning and can be interchanged.

Why do we subtract depreciation in the calculation of EBIT?

EBIT is a company's operating profit without interest expense and taxes. However, EBITDA or (earnings before interest, taxes, depreciation, and amortization) removes depreciation, and amortization expenses from EBIT when calculating profitability. Therefore, depreciation expense reduces profitability.

Why is Ebitda so important?

EBITDA is essentially net income (or earnings) added to interest, taxes, depreciation, and amortization. EBITDA analyzes and compares profitability among companies and industries, eliminating the effects of financing and capital expenditures.

What is a healthy Ebitda?

The enterprise value (EV) to the earnings before interest, taxes, depreciation, and amortization (EBITDA) ratio varies by industry. The average EV/EBITDA for the S&P 500 was 14.20. Generally, analysts and investors see an EV/EBITDA value below 10 as healthy and above average.

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