What it is
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a company's operating performance that removes the effects of non-operating expenses like interest and taxes, as well as non-cash expenses like depreciation and amortization. By excluding these items, EBITDA aims to provide a clearer picture of a company's core operating profitability, making it useful for comparing companies across different industries or capital structures.
EBITDA is often used by analysts and investors to evaluate a company's ability to generate cash from its core operations, especially in capital-intensive industries. It's a common metric discussed during earnings calls and is frequently used in valuation multiples, such as Enterprise Value/EBITDA. However, because it excludes capital expenditures, it doesn't fully represent the cash available for shareholders or debt repayment, leading to the development of Free Cash Flow.
Why it matters
EBITDA helps you assess a company's operational strength by stripping out financing and accounting distortions. It's useful for comparing businesses.
Reviewed under editorial standardsUpdated September 26, 2026Not investment advice