What is EBITDA?
EBITDA is the Earnings before Interest, Taxes, Depreciation and Amortization. It is helpful to interpret and compare profitability of companies as it removes the effects of accounting and financing decisions.
EBITDA = Revenue – Expenses (except tax, interest, depreciation and amortization)
Why You Care
A common myth is that EBITDA demonstrates cash earnings. In reality, it is perfect metric to know the profitability of the company and not cash flow. Companies often keep changing the items they want to include in calculation of EBITDA from one financial period to other.
Quarterly Earnings Report,
Price to Earnings (P/E) Ratio,
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