EBITDA
Core profitability stripped of financing noise
Definition
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a company's core operational profitability, stripping out capital structure (interest), tax jurisdiction, and non-cash charges (depreciation, amortization). EBITDA is widely used for company valuation (via EV/EBITDA), credit analysis, and comparing profitability across companies with different debt levels or tax situations.
Formula / Rules
EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization
Example
A manufacturing company reports: Net income $50M, Interest expense $20M, Taxes $15M, Depreciation $30M, Amortization $10M. EBITDA = $50M + $20M + $15M + $30M + $10M = $125M. Two companies each with $125M EBITDA can be compared directly even if one is heavily leveraged and the other is debt-free.
Related Terms
Frequently Asked Question
What is EBITDA?
EBITDA is operating profit before interest, taxes, depreciation, and amortization. It measures core business profitability independent of financing choices and is the most common metric for company valuation comparisons.
APA Citation
Last updated:
· Source: VixShield Trading Glossary — From SPX Mastery by Russell Clark
⚠️ Not financial advice. This definition is educational content from the SPX Mastery book series by Russell Clark (VixShield). Past performance is not indicative of future results. Trading options involves substantial risk of loss and is not appropriate for all investors. Always paper trade before risking real capital.