Investing term

What is EBITDA?

Earnings before interest, taxes, depreciation, and amortization — operating income plus non-cash D&A.

EBITDA is earnings before interest, taxes, depreciation, and amortization — operating profit with the non-cash D&A charges added back. It's used to compare the core profitability of businesses regardless of how they're financed or taxed. Useful, but treat it with caution: by ignoring real costs like capital spending and interest, it can flatter a company that's actually cash-hungry or debt-laden.

For example

Two companies with identical EBITDA can have very different real profits if one carries heavy debt and must spend constantly on equipment.

EBITDA is taught hands-on in Stage 14 — Reading Financial Statements.

See the lesson →

Related terms

Accounts receivable (A/R)Money customers owe the company for goods or services already delivered but not yet paid.AccrualsAccounting entries that record revenue or expense before cash actually moves.Annual reportThe yearly disclosure that includes audited financials, MD&A, and footnotes — the primary source for serious investors.Balance sheetThe 'photo' statement — what the company owns, what it owes, and what's left for owners, on a single date.
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