EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization.
It shows how much money a company earns from its core business operations before taking into account:
- Interest payments on debt
- Taxes
- Depreciation (wear and tear on equipment or buildings)
- Amortization (spreading out costs of intangible assets like patents)
Why It Matters for Investors?
EBITDA helps investors see how profitable a company’s main business is, before the effects of financing decisions or accounting rules.
It’s useful for comparing companies across industries, especially those with different debt levels or asset bases.
High EBITDA usually means the business is generating strong cash from its operations, however, please keep in mind that EBITDA is not actual cash flow, it ignores capital expenditures (money needed to maintain or grow the business).
| Term | Meaning | Includes/Excludes | Tells You |
| Net Revenue | Total income from selling goods/services (after discounts & returns) | No costs included | How much the company sells |
| EBITDA | Earnings before interest, taxes, depreciation, amortization | Excludes financing & accounting adjustments | How much the core business earns operationally |
| EBIT | Earnings before interest and taxes | Subtracts depreciation & amortization | Profit from operations after accounting for wear and tear |