EBIT(EBIT)
Strategy and planning
Strategy and planning
EBIT is profit before interest and tax: the result from normal operations, including depreciation.
EBIT shows whether the business itself earns money, regardless of financing and tax choices. That is why it is used to compare companies.
For marketing, EBIT is the ceiling on your room to spend: structurally spending more than the contribution you can prove pushes down the operating result.
In practice
EBIT is not cash flow. Healthy EBIT with long payment terms or high stock can still cause liquidity problems.
Related terms
- EBITDAEBITDA is profit before interest, tax, depreciation and amortisation — an approximation of what operations generate.
- Gross marginGross margin is revenue minus the direct cost of what you sell, expressed as a percentage of revenue.
- ROIROI is the return on an investment: revenue minus cost, divided by cost. In marketing you should work from margin, not revenue.
- Break-evenBreak-even is the point where revenue and costs are equal. In advertising you translate that into a break-even ROAS or a maximum cost per order.