EBIT
Definition
EBIT is earnings before interest and taxes — in most interview contexts used interchangeably with operating income: revenue minus COGS minus operating expenses (including D&A). It measures core operating profitability before financing decisions and taxes.
Strictly, EBIT and operating income can differ when a company has non-operating income or expenses (e.g., equity-method income, gains/losses), but for interview purposes treating EBIT as operating income is standard.
EBIT is capital-structure-neutral, so it pairs with enterprise value (EV/EBIT) and is the starting point for unlevered free cash flow in a DCF: EBIT times (1 minus the tax rate) gives NOPAT.
Why interviewers ask
Interviewers test EBIT versus EBITDA ("when would you use EV/EBIT instead of EV/EBITDA?" — when capital intensity/depreciation differs meaningfully across comps, since EBIT captures D&A as a proxy for capex). The trap is forgetting that unlevered FCF starts from EBIT, not EBITDA, so the tax calculation applies to EBIT.
Related terms
Interviews don't test definitions — they test recall under pressure.
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