What is the difference between EBIT and Gross Margin? - ProProfs Discuss
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What is the difference between EBIT and Gross Margin?

Asked by Marlon , Last updated: May 27, 2024

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D. Smith

D. Smith

Learning new things along with my music

D. Smith
D. Smith, Musician, MA, Nottingham

Answered Oct 13, 2020

EBIT stands for Earnings Before Interest and Taxes. It is also called operating income. EBIT indicates the profit, which is estimated as revenue minus the operating expenses. If there is a variation in the earnings before interest and taxes of a period to the next period, that means something is wrong in the company.

Investors also look at the EBIT in the income statements. Earnings before interest and taxes are calculated by adding non-operating expenses to the operating revenue minus operating expenses.

Gross margin is also called gross profit margin or gross profit rate. Gross margin profit shows the difference between the production cost and sales, excluding taxes and interest. It also shows how a company manages its labor force and supplies in production. Gross margin is calculated by adding the annual sales return to the net sales and minus the cost of goods sold out.

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