Earnings Before Interest, Taxes, Depreciation, and Amortization — operating profit with financing and accounting choices stripped out.
EBITDA approximates the cash a business’s operations generate, making companies with different debt loads and asset bases comparable. Buyers price small businesses in EBITDA multiples.
Formula: EBITDA = Net Income + Interest + Taxes + D&A
Example: $250k net income + $40k interest + $80k taxes + $60k D&A = $430,000 EBITDA.
FAQ
What is EBITDA in simple terms?
EBITDA approximates the cash a business’s operations generate, making companies with different debt loads and asset bases comparable. Buyers price small businesses in EBITDA multiples.
How is it calculated?
EBITDA = Net Income + Interest + Taxes + D&A. Example: $250k net income + $40k interest + $80k taxes + $60k D&A = $430,000 EBITDA.