EBITDA

Understand the idea

EBITDA excludes financing, tax and some accounting costs. It is not cash flow and can hide substantial costs of replacing equipment. Adjusted EBITDA definitions vary between companies, so check the reconciliation.

An example

A company reports operating earnings with depreciation added back, before interest and taxes.

Connected ideas

• A useful distinctionMarket capitalization

  EBITDA measures earnings; market capitalization measures the market value of equity.

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