Finance and accounting
EBITDA
Earnings before interest, taxes, depreciation and amortization.
Last reviewedWhat does EBITDA mean?
EBITDA is operating profit (EBIT) with depreciation and amortization added back. It is popular for comparing companies with different debt, tax and asset histories, and for valuation multiples such as EV/EBITDA. It is not a measure defined by the main accounting standards, and it ignores the cash a business must spend on capex and working capital, so it is not the same as cash flow.
Where does it come up in case interview prep?
- The profit and loss statement, line by lineLesson in Business basics for non-business learners
- Profit and lossLesson
- Mergers, acquisitions, and due diligenceLesson
- Stretch cases: profit to pricing, and entry to acquisitionLesson in Integrated multi-part cases
- LBO returns and fund economicsLesson in Private equity and venture capital
Related terms
- EBIT and operating profitProfit from operations, before interest and tax.
- Depreciation and amortizationSpreading the cost of a long-lived asset over its useful life.
- Enterprise value (EV) and EV/EBITDAThe value of the whole business, to lenders and owners together.
- Free cash flowCash from operations minus capital expenditure.
- ProfitThe money left over after costs. Revenue minus cost.
- RevenueMoney earned from sales, before costs.
- CostWhat it takes to make and sell the product in a period.
- Fixed costA cost that stays the same when volume changes, within a normal range.