𝐀 𝐠𝐫𝐞𝐚𝐭 𝐞𝐱𝐩𝐥𝐚𝐧𝐚𝐭𝐢𝐨𝐧 𝐨𝐟 𝐄𝐁𝐈𝐓𝐃𝐀.

EBITDA is an acronym for Earnings Before Interest, Taxes, Depreciation & Amortization.

EBITDA is a major financial indicator used to evaluate companies' profitability with different capital structures.

EBITDA is a rough guide to show how much cash a business generates.

Calculating EBITDA requires information from the company's Income Statement and Cash Flow Statement.

Here's one way to do it:

Net Income
+ Interest Expense (Income Statement)
+ Taxes (Income Statement)
+ Depreciation (Cash Flow Statement)
+ Amortization (Cash Flow Statement)

Some investors love EBITDA. Others despise it.

EBITDA does not consider all business activities, so it might overstate cash flow.

Do you use EBITDA? Let me know in the comments below!

All credit for this content goes to Brian Feroldi.