EBITDA

Profit before interest, tax, depreciation and amortisation

In detail

EBITDA adds depreciation and amortisation back to operating profit for a rough measure of earnings. Because it strips out how much a company invests and how it is taxed, it is used to compare across countries and industries. It is often treated as close to cash, though it excludes the money needed to replace the equipment. Lenders use it to judge how much debt a business can carry.

Example

Adding $20 million of depreciation to $50 million of operating profit gives EBITDA of $70 million.

Related terms

Operating profit Depreciation Cash flow EV/EBITDA

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