EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a financial metric that is commonly used to measure a company's profitability and operating performance.
EBITDA represents a company's earnings before accounting for non-operating expenses, such as interest, taxes, depreciation, and amortization. By excluding these expenses, EBITDA provides a clearer picture of a company's operating profitability and cash flow.
EBITDA is calculated by adding a company's operating income (revenue minus operating expenses) to its depreciation and amortization expenses. Interest and taxes are then excluded from this total to arrive at the final EBITDA figure.
EBITDA is often used by investors and analysts to compare the financial performance of different companies, as it provides a more consistent and comparable metric than net income, which can be affected by accounting practices and tax policies. However, it is important to note that EBITDA does not take into account a company's capital expenditures or changes in working capital, which can also affect its financial performance.
