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EBIT Calculator

Calculate operating profit either by subtracting costs from revenue or by adding interest and tax back to net income.

Inputs
EBIT resultCalculated
EBIT900,000.00
Formula
EBITrevenue - cost of goods sold - operating expenses
Inputs
MethodTop down from revenue
Revenue5,000,000.00
Cost of goods sold2,800,000.00
Operating expenses1,300,000.00
Working
Gross profit5,000,000.00 - 2,800,000.00 = 2,200,000.00
EBIT2,200,000.00 - 1,300,000.00 = 900,000.00
Results
  Gross profit              2,200,000.00
  EBIT (operating profit)   900,000.00
  Gross margin              44.00%
  Operating margin          18.00%
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About the EBIT Calculator

EBIT strips out how a company is financed and where it is taxed, leaving the profit the operations themselves produce. That makes it the fairest way to compare two businesses in the same industry when one carries heavy debt and the other is funded entirely by equity. Both routes to the figure are supported here because the numbers you have depend on which statement is in front of you.

Working down from revenue subtracts cost of goods sold to reach gross profit, then subtracts operating expenses. On 5,000,000 of revenue with 2,800,000 of direct costs and 1,300,000 of overheads, gross profit is 2,200,000 and EBIT is 900,000, an operating margin of 18 percent. Working up from the bottom takes net income and adds back interest expense and income tax, which is the quicker path when you only have a summary income statement.

The two routes rarely agree to the last dollar, because the bottom up version quietly includes non operating items such as investment income that the top down version excludes. A gap between them is worth investigating rather than averaging. Add depreciation and amortisation to this figure and you have EBITDA, which the EBITDA Calculator handles, and the margin sits naturally alongside the volume analysis in the Break-Even Calculator.

How to use

  1. Choose whether to work from revenue or from net income.
  2. For the revenue route, fill in revenue, cost of goods sold and operating expenses.
  3. For the net income route, fill in net income, interest expense and income tax.
  4. Keep the revenue field filled either way so the operating margin can be shown.

Common questions

What is the EBIT formula?
Either revenue minus cost of goods sold minus operating expenses, or net income plus interest expense plus income tax expense. Both should land close to the same figure.
Is EBIT the same as operating profit?
In most cases yes. They separate only when a company has meaningful non operating income, which the bottom up route includes and the top down route does not.
Why exclude interest and tax?
Both depend on financing choices and jurisdiction rather than on how well the business trades, so removing them makes two companies comparable.
Where does depreciation sit?
Inside operating expenses, so it is already deducted from EBIT. Adding it back gives EBITDA.