Financial Glossary
EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization — a measure of operating profitability.
What Is EBITDA?
EBITDA strips out financing decisions (interest), tax jurisdictions, and accounting choices (depreciation) to show the core operating earnings of a business. It's the most common metric used in M&A valuations and debt covenants.
Formula
EBITDA = Net Income + Interest + Taxes + Depreciation + AmortizationWhy It Matters
EBITDA allows apples-to-apples comparison of operating profitability between companies regardless of their capital structure or tax situation. However, critics argue it ignores real costs like capital expenditures.
Related Terms
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