Earnings Before Tax - EBT

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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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RELATED FAQS
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    EBITDA, EBITDAR and EBITDARM are analytic indicators commonly used by management to evaluate the financial performance and ... Read Full Answer >>
  2. What are some examples of general and administrative expenses?

    In accounting, general and administrative expenses represent the necessary costs to maintain a company's daily operations ... Read Full Answer >>
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    Whether a dividend distribution has any effect on additional paid-in capital depends solely on what type of dividend is issued: ... Read Full Answer >>
  4. Why can additional paid in capital never have a negative balance?

    The additional paid-in capital figure on a company's balance sheet can never be negative because companies do not pay investors ... Read Full Answer >>
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