EBIT

Explanation: EBIT, or Earnings Before Interest and Taxes, is a financial metric that represents a company’s operating profit before deducting interest expenses and income taxes. It indicates how much profit a company generates from its core business operations, disregarding the effects of financing and tax considerations. EBIT is often used as a measure of a company’s operating performance and profitability, independent of its capital structure and tax policies.

To derive net profit from EBIT, we need to deduct interest expenses, taxes, and any other non-operating expenses from EBIT. The sequence typically involves subtracting interest expenses to calculate earnings before taxes (EBT), and then subtracting income taxes to arrive at net profit.

Example: TCS had EBIT of 54,076 crore as of FY23. This means that TCS earned an operating profit of 54,076 crore before deducting interest expenses and income taxes during the fiscal year. EBIT reflects the profitability of TCS’s core business operations, such as revenue from software services and solutions, before considering the impact of interest payments on debt and tax obligations. It provides insight into TCS’s ability to generate profit from its primary business activities, serving as a key indicator of its operating performance and financial health.

You can view the EBIT value for any company on Radar under the Quarterly Results or Yearly P/L sections.