EBITDA

EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortisation. EBITDA is calculated from a Company’s Profit & Loss, focusing on the Cash Earnings before Interest Expense and Taxes.

EBITDA measures a Company’s Operating Cash Flow before deducting the non-cash items of Depreciation and Amortisation, calculated by the formula.

EBITDA = Sales – Op Expenses + Depreciation + Amortisation

Non- Cash items of Depreciation and Amortisation are added back. Thus, the EBITDA figure is focusing on the Operating Cash Flow. Like the EBIT figure, lower in the Profit and Loss, the EBITDA figure excludes the impact of leverage, interest rates and taxes. The EBITDA figure is a useful guide for inter-sectoral valuations using Ratios such as, EBITDA / Sales, a margin expressed as a percent or EV / EBITDA, a multiple.