Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA)

What is EBITDA?

Earnings before interest, tax, depreciation, and amortization (EBITDA) is a rate of a company’s operating performance. Basically, it’s a way to gauge a company’s performance without having to factor in financing decisions, accounting decisions or tax environments.

EBITDA is calculated by adding back the non-cash expenditures of depreciation and amortization to a firm’s operating income.

Alternatively, you can also compute EBITDA by taking a company’s net pay and adding back interest, taxes, depreciation, and amortization.

EBITDA Formula (How to Calculate EBITDA)

To calculate EBITDA, start by examining a company’s revenue statement.  EBITDA is not included as a line item on the income statement, but you can analyze it easily by using other items reported on every income statement.

The formula for EBITDA is: