EBITDA

What is EBITDA?

EBITDA is the earnings a business has before interest, tax, depreciation, and amortisation, and is an indicator of operational profitability of the business.

EBITDA effectively represents the profit of the business before the effects of any capital investment (depreciation), before the effects of its method of financing activities (interest), and before the effect of any localised tax rates.

For this reason, EBITDA can be used as an indicator to compare businesses which have similar business models, but which have different financing structures, depreciation policies and tax systems.

For further information on EBITDA see the Wikipedia definition.

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Last modified May 22nd, 2013 by Michael Brown

About the Author

Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years in all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a BSc from Loughborough University.

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