This Earnings Before Tax Excel Template is an educational resource that will show you how to calculate EBT using line items from the income statement. Earnings Before Tax is also referred to as pre-tax income, as it is the company’s earnings before tax is deducted. The figure can be found after deducting items including COGS, SG&A, depreciation and amortization, and interest expense. It is an important metric to measure a company’s profitability without the impact of taxes. This is particularly useful when comparing companies with different tax regimes.

Formulas for Earnings Before Tax

Below are some of the formulas used to get to EBT:
  • EBT = Sales Revenue – COGS – SG&A – Depreciation and Amortization
  • EBT = EBIT - Interest Expense
  • EBT = Net Income + Taxes

Comparing Between EBT, EBIT and EBITDA

It's critical to understand the differences between the three most commonly used financial metrics in financial analysis and modeling.
  • EBT is generally used for analyzing the profitability of a company without the impact of its tax regime. It is ideal for comparing companies in difference countries or operating regions due to the various tax rates.
  • Earnings before interest and taxes (EBIT) is similar to EBT but it adds back the interest expense. This metric excludes the impact of the company's capital structure on its profitability.
  • Earnings before interest, taxes, depreciation & amortization (EBITDA) adds back D&A since it is a non-cash item which does not impact the company's cash flow. This metric is the furthest away from the net income out of the three metrics.
Deciding which financial metrics are the most suitable for assessing a company's operational and financial performance depends on the business nature, geographic location, and capital structure of the company. The role of a financial analyst or finance manager then is to have a good understanding of the business and determine which kind of metrics should be used to analyze it.

Learn More on EBT

Read CFI's detailed guide on EBT to have a better understanding of the concept and calculations!  
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