EBITDA

Earnings before interest, taxes, depreciation, and amortization, commonly used as a non-GAAP operating-performance measure and as an input to leverage ratios and valuation multiples.

Why It Matters

EBITDA partly separates operating performance from financing, tax, and certain non-cash allocation choices. Credit agreements and transaction analyses often use it, but definitions—especially adjusted EBITDA—can change covenant capacity, reported leverage, executive compensation, and deal valuation.

Reading the Measure

A working relation and an interpretive limit for corporate-finance use.

Working relation

EBITDA = net income + interest + taxes + depreciation + amortization

Interpretive caution

EBITDA is not operating cash flow or free cash flow: it ignores working-capital investment, capital expenditure, taxes, interest, and potentially recurring adjustments. Always reconcile it to a GAAP or IFRS measure and inspect the definition used.

Accounting reference: SEC: Non-GAAP Financial Measures