Earnings Before Interest, Taxes, Depreciation, and Amortization — a measure of a company's operating profitability excluding non-operating and non-cash expenses.
EBITDA strips out the effects of financing decisions (interest), tax structures, and non-cash charges (depreciation, amortization) to provide a clearer picture of operational performance. It's widely used for comparing profitability across companies, especially when they have different capital structures or tax situations. EBITDA is also used as a proxy for cash flow in business valuations (Enterprise Value ÷ EBITDA multiples).
Net Profit ₹10,00,000 + Interest ₹2,00,000 + Taxes ₹3,50,000 + Depreciation ₹1,50,000 + Amortization ₹50,000 = EBITDA ₹17,50,000.
Ensures accurate financial reporting and record-keeping
Helps maintain regulatory and tax compliance
Enables better-informed business decisions
Improves operational efficiency and cash flow management
It allows comparing companies with different capital structures, tax situations, and asset bases. A company with heavy debt (high interest) and one with no debt can be compared on operational performance using EBITDA.
No, but it's often used as a rough proxy. EBITDA ignores changes in working capital, capital expenditure, and other cash movements. Free Cash Flow is a more accurate measure of actual cash generation.
The total profit of a business after deducting all expenses, taxes, and costs from total revenue. Also called the bottom line or net income.
The systematic allocation of the cost of a tangible asset over its useful life, representing the decline in value due to wear, use, or obsolescence.
The gradual write-off of the cost of an intangible asset (like patents, software, or goodwill) over its useful life, or the repayment of a loan in installments.
A financial statement that summarizes a company's revenues, costs, and expenses over a specific period to show net profit or loss.
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