Plain-English definitions, reviewed by an independent investor
EBITDA
EBITDA is earnings before interest, tax, depreciation, and amortisation — a rough view of core operating cash earning.
EBITDA is earnings before interest, tax, depreciation, and amortisation — a rough view of core operating cash earning.
EBITDA = Net Income + Interest + Tax + Depreciation + Amortisation
Why it matters
It lets you compare operating performance across firms with different debt and tax situations.
Common confusion
Sellers love it; critics note it hides the cost of maintaining assets and debt loads.
Frequently Asked Questions
Why do people distrust EBITDA?
It can flatter firms with heavy capex or debt by ignoring those costs.
Is EBITDA cash flow?
No. It ignores the cash needed to replace worn-out equipment.