EBIT is not something a frog says, well it is but that is not what this post is about.
Now, if your accountant takes care of all your finances and you don’t know what this term means, and you are a business owner, then this is exactly for you.
EBIT stands for Earnings Before Interest & Tax.
You will also sometimes see, EBITDA which is the above with Depreciation, and Amortisation added on the back end.
So let’s break this down.
One of my number one jobs when I’m working with my clients is to make their accountants job as hard as possible by helping them to make as much money as possible. So that the accountant has a real challenge in trying to minimise the taxes.
Not that there’s anything wrong with paying taxes, but as Kerry Packer once said, we shouldn’t be paying more than we have to because they’re not really good at using it well.
So EBITDA, is the profit figure on our Profit and Loss (or Income) statement before your accountant does all the black magic stuff like depreciation and write down things and write off things and all the rest of it.
The profit figure after your accountant has done all their magic on (such as deductions, depreciation, write off’s etc), is what you then pay your taxes on
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