EBITDA

Valuation & Fundamentals

Earnings before interest, taxes, depreciation and amortization: net income with interest expense, taxes, and depreciation and amortization added back.

Because it strips out differences in debt and taxes, it is widely used to compare companies. It is not a line item defined under US accounting standards (GAAP) and it ignores capital spending entirely, so it is not a substitute for a company's ability to generate cash.

Example

With net income of $50 million, interest expense of $10 million, taxes of $15 million and depreciation of $25 million, EBITDA is $100 million.

Related Terms

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