You’ve probably heard of EBITDA before, but perhaps you’ve come across EBIAT (Earnings Before Interest After Taxes) for the first time. It’s a similar metric, but ignores a company’s capital structure while allowing for tax comparison (without the tax benefit associated with interest expense). This is helpful if you’re evaluating multiple companies with varied structures and tax regimes but still need a common metric.
How is EBIAT Calculated?
EBIAT = EBIT * (1 – Tax Rate)
For clarity, EBIT (Earnings Before Interest and Taxes) is calculated as Revenue – Operating Expense.
EBIAT Example
Here’s a summary income statement schedule laying out an example build up to EBIAT via EBITDA and EBIT.
Use of EBIAT as a Comparison Metric
Here’s another example showing the usefulness of EBIAT when comparing companies with different capital structures. Notice here that both companies have the same EBITDA (see the build above). However, each company is operating under a different tax regime (or has things like NOLs flowing through). We can use EBIAT to understand how the differing tax scenarios impact the two companies while still stripping out the effect of differing capital structures.

To better understand why EBIAT is useful, here’s the same example but showing net income instead. Below we still have the same EBITDA and EBIT, but now we’ve added in interest expense. Company B has debt in its structure, while Company A we can assume is solely equity. Notice how Company B’s taxes are different in this table vs. the table above. That’s because EBIAT strips out the tax benefit a company receives from interest expense, or debt on the balance sheet. With the example below, a proper comparison now requires consideration of a few different factors which we were able to simplify with the table above.

Closing Thoughts
At the end of the day you’re probably just not going to be using EBIAT very often. It’s helpful to know what it is incase you need to, but 9.9 times out of 10 you’ll be better served working with EBITDA and EBITDA-based metrics.