EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It serves as a crucial financial metric to gauge the operating profitability of a company. EBITDA shows a company's earnings by excluding costs related to interest, taxes, depreciation, and amortization, providing a clear view of its core operations.
To calculate EBITDA, operating income (revenue minus operating expenses) is added to depreciation and amortization expenses, while excluding the effects of interest and taxes. This figure is frequently utilized to compare business performances across different industries or accounting practices.
