← Business Metric: Financial (all topics)
EBIT to revenue (operating margin)
What it is
Earnings before interest and tax as a percentage of revenue. Unlike EBITDA margin it charges depreciation, so it reflects the cost of consuming the asset base
It is the margin that matters for capital-intensive businesses, where depreciation is a real economic cost rather than an accounting entry
Impact on industries
- Comparable across capital structures like EBITDA margin, but without ignoring the cost of the assets used to generate the profit
- A widening gap between EBITDA and EBIT margin flags rising capital intensity or an ageing asset base
- Depreciation policy is a management judgement, so useful lives and methods differ between otherwise comparable companies
- In asset-light businesses the two margins nearly coincide, so the distinction matters most exactly where capital matters most