Earnings Before Interest and Taxes (EBIT)

question 6

Short Answer

Earnings before interest and taxes (EBIT)
Less Tax exposure (tax rate times EBIT)
Plus Depreciation,amortization,and other noncash charges
Less Increase in operating working capital
Less Capital expenditures.
This formula is used to calculate ____.

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Definitions:

Potential GDP

The highest level of Gross Domestic Product (GDP) an economy can sustain over a long period without increasing inflation, reflecting its full employment output.

Inflation

A widespread rise in prices and a decrease in the value of money.

Spending Multiplier

A concept in Keynesian economics that quantifies the effect of an increase in autonomous spending on the total economic output.

Potential Output

The highest level of economic output that can be sustained over the long term without increasing inflation.