Losing my mind about EBIT?

[pmond]

From the cfai book:
“EBIT/Interest expense - because EBIT does not include depreciation and amortization, it is considered a more conservative measure of interest coverage.”
Isn’t the correct wording that it does include depreciation and amortization? That’s why it’s not earnings “Before” depreciation and amortization?

 

[S2000magician]

When they say that it doesn’t include them, it means that they’ve been subtracted out (to get EBIT). EBIT is an smaller number than EBITDA, so EBIT/Int < EBITDA/Int: more conservative.
It’s a funny way of saying it, but that’s what they meant.

 

[sachin_patel]

EBIT = EBITDA - D - A
So it will be less amount than EBITDA
So you can say EBIT is more conservative..

 

[RoundhouseKick]

Since it would yield a smaller ratio (when there WAS depr/amor to deduct per Sachin)…