Estimating EBIT

Four levels of EBIT

In Valuatum Company Model you have four different levels to estimate EBIT:

1. Total
2. Quarter (two first years)
3. Division
4. Quarter and division (two first years).

Besides different levels, you can estimate EBIT % or just absolute EBIT. Whichever way and whatever level you use, the others react to your changes.

What happens when I change total EBIT?

Since there is a possibility to estimate EBIT for so many ways, there must be rools how to keep the other levels in balance. In a company model there are two basic rools for the changes:

1. Allocating on the basis of the old proportions.
2. Calculating a sum.

The first rule is used when you enter e.g. total EBIT and the model has to decide how the lower levels are calculated.

The second one is used in the opposite cases. If you estimate e.g. second division's Q3's EBIT, new second division's EBIT is a sum of all quarters and new Q3's EBIT is a sum of all Q3-figures.

EBIT % as a dominating variable

When you estimate current year's Net sales, there are two possibilities: either EBIT % or absolute EBIT changes. In the company model EBIT % is the dominating parameter (and absolute EBIT the one that changes).

Learn more about dominating variables.

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