– Earnings Before Interest, Taxes, Depreciation, and Amortization
It is a measure of a company's overall financial performance and is used as an alternative to net income in some circumstances. EBITDA, however, can be misleading because it strips out the cost of capital investments like property, plant, and equipment.
This metric also excludes expenses associated with debt by adding back interest expense and taxes to earnings. Nonetheless, it is a more precise measure of corporate performance since it is able to show earnings before the influence of accounting and financial deductions.
EBITDA Formula and Calculation
EBITDA=Net Income+Interest+Taxes+D+A where: D=Depreciation A=Amortization