What Does Earnings Before Interest, Taxes, Depreciation and Amortization – EBITDA Mean?
EBITDA is essentially Net Income with interest, taxes, depreciation, and amortization added back to it. EBITDA can be used to analyze and compare profitability between companies and industries because it eliminates the effects of financing and accounting decisions. However, this is a non-GAAP measure that allows a greater amount of discretion as to what is (and is not) included in the calculation. This also means that companies often change the items included in their EBITDA calculation from one reporting period to the next. When a company is valued using EBITDA – it is known as a EBITDA Valuation.
