The goal of running a company is of course economic success . But for this you need key figures in order to be able to measure your success. Many make the mistake of judging economic success only in terms of profit. But for a realistic measurement of success you also need other values for a comparison. One of these values is EBITA .
What does EBITA mean?
Defined by abbreviationfinder, EBITA is an abbreviation and means “earnings before interest, taxes and amortization” . Translated into German, this means “earnings before interest, taxes and depreciation on intangible assets”. Here, you have to know that all extraordinary expenses, interest expense and other finance costs, depreciation on goodwill are ignored and taxes. It is simply meant to show you the operating result without any factors that distort the result. EBITA is a key figure from business administration and provides information about which profit was achieved in a certain period of time.
What is the purpose of EBITA?
EBITA also speaks of profit before the financial result and taxes. The main purpose of the corrections made is to prevent tax policy measures and thus accounting policy measures from being eliminated. Especially when it comes to depreciation, you have to pay attention to German accounting according to HGB and international accounting according to IFRS . Both are treated differently. The EBITA thus helps you to deliver your economic success in a pure view and tells you at the end of the year exactly which profit is to be credited in your company.
EBITDA vs EBIT – that’s what you mean by that
In connection with the term EBITA, the terms EBITDA and EBIT also appear. You can see EBITA as a version of the more commonly used EBITDA. This term means “earnings before interest, taxes, depreciation and amortization” . Translated, one speaks of “earnings before interest, taxes, depreciation on property, plant and equipment and depreciation on intangible assets”. In the 1980s in particular , EBITDA became more and more popular, mainly due to the increased use of leveraged buyouts lay. EBITDA was meant to help give you a better understanding of how profitable your business is. With EBITDA, you have to note that, compared to EBITA, additional depreciation on property, plant and equipment is negligible. On the other hand, you can also see EBIT as your operating profit or your operating profit . EBIT is the abbreviation for “ earnings before interest and taxes ”.
This is how you can calculate the EBITA
The legislator does not require that you provide an indication of the EBITA. There are basically no binding rules for the calculation itself. But there are two different ways you can still calculate the EBITA. You can use either the annual surplus or, alternatively, the sales as a calculation approach . If you decide on the method with sales as the starting point, you calculate the EBITA as an intermediate step in your income statement . But don’t forget to use the total cost method to do this .
|+/- inventory changes|
|+ own work capitalized|
|+ other operating income|
|– other operating expenses|
|– cost of materials|
|– personnel expenses|
- EBITDA is the operating profit before depreciation
- EBITA is the operating profit of goodwill amortization
- EBIT is the operating profit (you get EBIT by subtracting goodwill amortization from EBITA)
Another method for the calculation
As already mentioned, there is also the possibility of calculating the EBITA with the starting position for the annual profit. Here you have to note that you go back based on your annual net income. In this case, you simply have to add the items that are not taken into account for EBITA to your result. It looks like this.
|+ Tax expense|
|– tax income|
|+ Tax expense|
|– Interest income|
|+ Amortization of intangible assets|
This is the meaning of the operating result for you
The operating result is always the result of a company that results from ordinary business activities. Among other things, the operating result also includes your operating result, which does not take into account taxes or the extraordinary result . However, the investment result and the financial result are also taken into account . So you can describe the operating result as the difference between the costs of the accounting period and the operational services. However, the operating result is very often different from your profit in the income statement, the income statement.
EBITA , EBITDA and EBIT represent key figures for you, which have the advantage that you get a comparability of balance sheets that can be displayed without distortion due to different tax burdens or the financial structure. This is very good for you to measure your economic success. However, you must not ignore the fact that there are other factors that make a paid expense represent. In addition, the EBITA enables you to present an externally positive result. However, if you include the neglected points, it can quickly turn into a negative result. However, it is definitely worth mentioning that EBITA, EBITDA and EBIT are key figures with which you not only get an impression of your company in terms of the economic situation, but also of profitability and profitability . This is good for you and your company, provided you always look at the overall situation. This means that when you look at it, depreciation, taxes and interest are always kept in mind.