EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization — a measure of operating profitability.
EBITDA strips out financing costs (interest), tax, and non-cash charges (depreciation and amortization) to show the cash earnings generated by a company's core operations.
It's widely used because it enables comparison between companies regardless of their capital structure, tax jurisdiction, or asset base. A SaaS company and a manufacturing company with very different depreciation profiles can be compared on EBITDA.
EBITDA is also the most common metric used in company valuations, particularly in M&A. Enterprise value divided by EBITDA (the "EV/EBITDA multiple") is the standard valuation benchmark across most industries.
Critics note that EBITDA ignores real cash costs — capital expenditure, working capital changes, and debt service — and can make unprofitable companies look healthy. For this reason, sophisticated investors also look at EBITDA margin trends, free cash flow conversion, and adjusted EBITDA (which removes one-time items).
Related Terms
The percentage of revenue remaining after subtracting cost of goods sold — a measure of pricing power.
The percentage of revenue that becomes profit after all expenses, taxes, and interest are paid.
The total value of a business including equity and debt, minus cash — used in M&A and valuation multiples.
A financial report summarising revenue, costs, and profit over a specific period.
Further Reading
A practical guide to the financial KPIs that give CFOs real-time visibility into business health across global operations.
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