While not present in all income statements, EBITDA stands for Earnings before Interest, Tax, Depreciation, and Amortization. It is calculated by subtracting SG&A expenses (excluding amortization and depreciation) from gross profit.
Depreciation & Amortization Expense
Depreciation and amortization are non-cash expenses that are created by accountants to spread out the cost of capital assets such as Property, Plant, and Equipment (PP&E).
Operating Income (or EBIT)
Operating Income represents what’s earned from regular business operations. In other words, it’s the profit before any non-operating income, non-operating expenses, interest, or taxes are subtracted from revenues. EBIT is a term commonly used in finance and stands for Earnings Before Interest and Taxes.
Interest Expense. It is common for companies to split out interest expense and interest income as a separate line item in the income statement. This is done in order to reconcile the difference between EBIT and EBT. Interest expense is determined by the debt schedule.
Businesses often have other expenses that are unique to their industry. Other expenses may include fulfillment, technology, research and development (R&D), stock-based compensation (SBC), impairment charges, gains/losses on the sale of investments, foreign exchange impacts, and many other expenses that are industry or company-specific.
EBT (Pre-Tax Income)
EBT stands for Earnings Before Tax, also known as pre-tax income, and is found by subtracting interest expense from Operating Income. This is the final subtotal before arriving at net income.
Income Taxes refer to the relevant taxes charged on pre-tax income. The total tax expense can consist of both current taxes and future taxes.
Net Income is calculated by deducting income taxes from pre-tax income. This is the amount that flows into retained earnings on the balance sheet, after deductions for any dividends.