Earnings before interest and taxes (BAII)

The BAIT or BAII is an accounting indicator of the profitability of a company that is calculated as income minus expenses, excluding expenses, taxes and interests that the company has to pay.

The BAII or BAIT is also known as operating income or EBIT (for its acronym in English, Earnings Before Interest and Taxes).

BAII = Revenues - Cost of goods sold - Operating expenses

It is a ratio widely used in financial analysis because it is very easy to compare between companies and by not including taxes or interest, it avoids the discrepancies that arise between the different forms of capital and tax rates that companies pay. It is used to perform the Dupont analysis and calculate the ROE, among other ratios.

THE BAII in the income statement

The BAII is equal to the net result of a company if we add taxes and interest. It is the precursor to EBITDA, which includes the depreciation of company assets. Profit before interest and taxes is located just below EBITDA in the income statement.

Income statement	Example
Net income or sales	100
- Direct costs of the goods sold	-50
Gross margin	50
- General, personnel and administrative expenses	-20
EBITDA	30
- Amortization expenses and provisions	-5
Earnings before interest and taxes (BAII) or EBIT	25
+ Extraordinary income	1
- Extraordinary expenses	-2
Ordinary profit	24
+ Financial income	2
- Financial expenses	-3
Profit Before Tax (BAI) or EBT	23
- Corporation tax	7
NET PROFIT OR RESULT OF THE YEAR	16

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