EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortization. Depreciation and amortization are deducted as part of operating expenses when computing EBIT. They are added back when computing EBITDA because they are not actually cash expenses for the firm. EBITDA provides a view of a company's financial performance by looking at earnings from its core business operations, without the cost of capital structure, tax environment, and non-cash items affecting the profit and loss figure. This metric is particularly useful for companies with significant investments in fixed assets.
Learn Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) with interactive examples and practice exercises in our Income Statement module.
This interactive learning module helps you understand Earnings before Interest, Taxes, Depreciation and Amortization (EBITDA) through hands-on practice and real-world examples.