Earnings before interest and tax = sales revenue-variable cost-fixed cost = net profit /( 1- income tax rate)+interest expense = net profit+income tax expense+interest expense = total profit+interest expense,
Net profit = total profit ×( 1- income tax rate) = earnings before interest and tax-interest expense-income tax expense,
Total profit = earnings before interest and tax-interest.
Introduction of earnings before interest and tax:
Earnings before interest and tax, also known as EBIT, is an important financial indicator in business activities. Earnings before interest and tax refers to the profit of an enterprise before deducting interest and tax. This indicator can help enterprises to evaluate the profitability and financial health of their business activities.
Brief introduction of net profit:
Net profit refers to the company's retained profit after paying income tax according to regulations, which is usually called after-tax profit or net income.
Relationship between earnings before interest and tax and total profit;
1 is one of the important indicators to measure the company's operating efficiency.
As can be seen from the formula, EBIT is equal to total profit plus interest expense, while total profit is equal to EBIT minus interest expense. This shows that interest expense is a very important factor in calculating total profit.
2. Reflect the profitability of the company.
In the actual investment process, we should not only pay attention to the company's net profit index, but also pay attention to the operating profit rate before interest and tax, the change rate of income before interest and tax, the change rate of income coefficient before interest and tax and other indicators. These indicators can help investors better understand the company's financial situation, help enterprise managers make more scientific and reasonable business plans, and further improve the company's profitability.
There is a close relationship between earnings before interest and tax and total profit.
The increase of income before interest and tax can increase the total profit of the company, and then improve the profitability of the enterprise. Investors should pay attention to the company's net profit indicators, make comprehensive judgments based on multiple indicators, and make better investment decisions. Enterprise managers should carefully formulate business plans, strengthen internal management, and constantly improve operating efficiency in order to improve the profitability of the company.