EBT (Earnings Before Taxes) is also known as Pre-Tax Income, Pre Tax Profit, Taxable Income, and related to Pre-Tax Margin. This represents total earnings of the Income Statement after deducting interest paid on loans and Bonds but prior to paying income taxes. Basically a company is taxed on Operating Profit minus the Interest paid out.
Example: Suppose a company’s has the following Income Statement entries:
Sales = $100,000 (a.k.a. Top Line, Revenue, or Credit Sales)
Expenses including Interest = $41,500
Taxable Income = $100,000 – $41,500 = $58,500 (a.k.a. Pre-Tax Profit)
The Pre-Tax Margin = Ratio = (Taxable Income) ÷ (Top Line) = $58,500/$100,000 = 0.585 or 58.5%