Quick Definition

EBITDA is a financial metric used to evaluate a company's operating performance by excluding the effects of financing decisions, accounting decisions, and tax environments.

Formula

Examples

• 1A company with a net income of $100,000, interest expenses of $20,000, taxes of $10,000, depreciation of $30,000, and amortization of $40,000 would have an EBITDA of $200,000.
• 2An investor comparing two companies in the same industry might use EBITDA to assess which company operates more efficiently before financial structuring.
• 3A business owner uses EBITDA to present to potential investors to show the profitability of the business before the impact of financial and accounting decisions.

Tags