EBIT is also known as earnings before interest and taxes or operating profit, among other names.
BAIT attempts to separate business from its financing and taxes.
BAIT is one of the names that is usually given to the profit before interest and taxes. It is also known as EBIT, for its acronym in English. It is one of the concepts that tries to translate the accounting result into financial terms.
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entrepreneurs to know what this means, as they can find it in reports . They may even be asked for it when they have to draft documents or give public or private presentations in search of funding.
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What is BAIT
If we look at the models of the General Accounting Plan, we see that the EBIT is very similar to the operating result . However, in this case we are talking about a financial-accounting concept, not merely a normative one. Therefore, depending on the needs, adjustments to the accounting figure may be necessary .
With the BAIT, we aim to isolate the business itself from fiscal and financial factors.
In reality, the aim is to find a result that reflects the company's activity, but without taking into account financing and taxes . This is explained by:
The aim is to isolate the business itself from its financing. For example, a company may develop an activity that would have been profitable if it were not for financing. We can imagine many problems: difficulties in accessing debt, higher than usual interest rates, excessive or insufficient financial leverage… But that does not mean that, once the finances are in order, the company will not function well.
Taxes are linked to financing, especially if the country's tax legislation allows for some deduction of interest on debts.
EBIT and EBITDA
If we look at the acronyms in English, we can immediately understand that they are two closely related concepts. EBIT excludes interest and taxes. EBITDA also does not take into account depreciation and amortization.
EBITDA therefore avoids taking into account amortizations and provisions. It thus comes closer to the financial concept of a cash flow . At the same time, it avoids a source of complexities and even subjectivity in accounting.
