what is earnings before tax ebt 
earnings before tax ebt is a measure of financial performance it reveals a company s earnings before taxes are deducted is calculated by subtracting all expenses excluding taxes from revenue and appears as a line item in the income statement ebt is sometimes also called pretax income profit before tax or income before income taxes understanding earnings before tax ebt ebt is the money retained internally by a company before deducting tax expenses it is an accounting measure of a company s operating and nonoperating profits all companies calculate ebt in the same manner and it is a pure ratio meaning it uses numbers found exclusively in the income statement analysts and accountants derive ebt through that specific financial statement deducting the cost of goods sold cogs interest depreciation general and administrative expenses and other operating expenses from gross sales ebt sometimes appears as income before income taxes or something similar and can be found just above the net income line item example of ebtif a company sells 30 widgets for 1 000 apiece during january its revenue for the period is 30 000 the company then assesses its cogs and subtracts that number from the 30 000 revenue if it costs the company 100 to produce a single widget then its cogs for january is 3 000 this means that its gross revenue is 27 000 30 000 3 000 27 000 after a company determines its gross revenue it tallies all its operating costs together and subtracts that figure from the gross the operating costs of a company may include any expenses related to its daily activities such as salary and wages rent and other overhead expenses if the company is a technology company with substantial investments in human capital it might have salaries of 10 000 a month and monthly rent of 1 000 subtract that 11 000 in total overhead from its gross revenue as well as 1 000 of interest expenses and you re left with ebt of 15 000 ebt as a tool for comparisonebt is crucial because it removes the effects of taxes when comparing businesses for example while u s based corporations face the same tax rates at the federal level they may face different tax rates at the state level since companies may pay different tax rates in different states ebt allows investors to compare the profitability of similar companies in various tax jurisdictions further ebt is used to calculate performance metrics such as pretax profit margin 