Meaning
EBITDA is earnings before interest, taxes, depreciation and amortization.
Formula
Earnings + interest + taxes + depreciation + amortization
Practical reading
EBITDA is useful for operating comparisons but does not replace cash flow or net income.
Calculation detail
A common bridge is EBITDA = EBIT + depreciation + amortization. It can also be reconstructed from net income by adding back interest, taxes, depreciation and amortization, subject to the company's accounting presentation.
What to check
It helps compare operating scale before financing and non-cash depreciation effects. Pair it with EBITDA margin, capital expenditure and debt service needs.
Limits and caveats
EBITDA is not free cash flow: it ignores the cash needed for investment, working capital, interest and tax.