Differentiate between EBIT AND EBITDA.

Banking & FinanceManagementCompanies/Organisations

The major differences between EBIT and EBITDA are as follows −

EBIT

  • EBIT refers to Earnings Before Interest and Tax.

  • It measures company’s profit.

  • Operation results are represented on accrual basis.

  • EBIT is defined as difference between revenue and operating expenses.

  • Depreciation/amortisation is taken into account.

  • When capital intensive is less, financial markets gives priority to this ratio.

EBITDA

  • EBITDA refers to Earnings Before Interest, Tax, Depreciation and Amortisation.

  • It measures actual operating performance of a firm.

  • Operation results are represented on cash flow basis.

  • EBITDA is defined as difference between revenue and operating expenses.

  • Depreciation/amortisation are not taken into account.

  • When sectors are capital intensive, financial markets will emphasize this.

raja
Published on 27-Jul-2020 11:30:29
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