Understanding the main financial metrics is essential to analyze and evaluate the financial health of a company. And among the most used are EBITDA and EBIT . Although often used interchangeably, these two metrics offer different perspectives on a company’s profitability.
In this article, we will explore these two metrics in depth, highlighting their main differences and the relevance of each in financial analysis.
Main differences between EBITDA and EBIT
Although EBITDA and EBIT are key indicators in financial analysis, they present fundamental differences that impact their application and relevance. The most important of them is that, while EBITDA excludes amortizations and depreciations from the calculation, EBIT does take them into account . This subtle difference causes them to be indicators with different purposes.
1. Depreciation and amortization
By excluding these factors, EBITDA provides a clear view of the operating efficiency and cash generating capacity due to a company’s core operations, without the influence of its historical investment decisions and accounting policy on depreciation. However, depreciation and amortization are real expenses from the perspective of long-term cost allocation and asset replacement planning. Therefore, EBIT may be more representative of a company’s true economic performance.
2. Influence on industries
EBITDA is particularly relevant for comparisons in sectors such as telecommunications, manufacturing and oil and gas, where fixed assets and capital investments are significant. EBIT, meanwhile, is useful in a wider variety of industries and provides a more standard measure of operating profitability.