Earnings Before Tax - EBT


DEFINITION of 'Earnings Before Tax - EBT'

An indicator of a company's financial performance calculated as revenue minus expenses, excluding tax. EBT is a line on the company's income statement that shows how much the company has earned after the cost of goods sold, interest and selling, general and administrative expenses have been subtracted from gross sales.

BREAKING DOWN 'Earnings Before Tax - EBT'

While U.S.-based corporations face the same tax rates at the federal level, they face different tax rates at the state level. Because companies may pay different tax rates in different states, EBT provides a way for investors to compare the profitability of similar companies in different tax jurisdictions. EBT is also used to calculate performance metrics, such as pretax profit margin. A related indicator, earnings before interest and taxes, allows investors to compare the profitability of different companies, regardless of their financing structures.

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    The income statement, also known as the profit and loss (P&L) statement, is the financial statement that depicts the ... Read Full Answer >>
  3. Do dividends affect working capital?

    Regardless of whether cash dividends are paid or accrued, a company's working capital is reduced. When cash dividends are ... Read Full Answer >>
  4. Do prepayments provide working capital?

    Prepayments, or prepaid expenses, are typically included in the current assets on a company's balance sheet, as they represent ... Read Full Answer >>
  5. Does working capital include salaries?

    A company accrues unpaid salaries on its balance sheet as part of accounts payable, which is a current liability account, ... Read Full Answer >>
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