Define Earnings Before Interest After Taxes (EBIAT)

Earnings Before Interest After Taxes, or EBIAT, is a financial measure that represents a company's profitability. It is calculated by taking a company's earnings before interest and taxes (EBIT) and adding back in any non-operating income or expenses. This includes items such as gains or losses from the sale of assets, foreign exchange gains or losses, and other one-time or unusual items.

EBIAT is often used as an alternative to net income, which is the most commonly reported measure of a company's profitability. The main difference between EBIAT and net income is that EBIAT excludes the impact of financing activities, such as interest expense and taxes. This makes it a useful measure for comparing the profitability of companies with different levels of debt or tax burdens.

To calculate EBIAT, you first need to determine a company's EBIT. This is done by subtracting a company's operating expenses (such as cost of goods sold, selling and administrative expenses, and research and development expenses) from its revenues. For example, if a company has revenues of $100 million and operating expenses of $70 million, its EBIT would be $30 million.

Next, you would add back any non-operating income or expenses to the EBIT to get the EBIAT. For example, if the company had a gain of $5 million from the sale of a piece of equipment, the EBIAT would be $35 million ($30 million EBIT + $5 million gain).

EBIAT is an important measure of a company's financial performance because it shows how much profit the company is generating from its core operations, before taking into account the impact of financing activities. This can be useful for investors and analysts who are trying to assess the long-term profitability of a company, as it removes the impact of short-term fluctuations in interest rates or tax rates.

One thing to keep in mind is that EBIAT is not a widely reported financial metric, and it is not included in a company's income statement. To calculate EBIAT, you will need to dig deeper into a company's financial statements and make some assumptions about non-operating income and expenses.

Overall, EBIAT is a useful tool for evaluating a company's profitability, as it allows you to focus on the performance of the business itself, rather than the impact of external factors such as taxes and financing activities. By understanding EBIAT and how it is calculated, you can gain valuable insights into a company's financial health and make more informed investment decisions.