EBITDA
Aussi : Earnings Before Interest, Taxes, Depreciation, and Amortization, Operating EBITDA
EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) measures a company's operating profitability before financing and accounting decisions, used to compare core performance across firms.
What it is
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a profitability metric that strips out the effects of capital structure (interest), tax regimes (taxes), and non-cash accounting charges (depreciation and amortization) from net income. The goal is to approximate the cash-generating power of a company's core operations.
A common formula is:
- EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization
Or, working down from the top of the income statement:
- EBITDA = Operating Income (EBIT) + Depreciation + Amortization
Why it matters
EBITDA is widely used because it allows for cleaner comparisons between companies and over time:
- Capital structure neutral: By removing interest, it ignores how a company is financed (debt versus equity), so two firms with different leverage can be compared on operations alone.
- Tax neutral: Removing taxes reduces distortion from different jurisdictions and tax strategies.
- Non-cash neutral: Adding back depreciation and amortization removes large accounting allocations that do not reflect current cash outflows.
This makes EBITDA central to valuation (the EV/EBITDA multiple), loan covenants, and merger and acquisition analysis.
How it is used in practice
- Valuation: Analysts apply a multiple to EBITDA to estimate enterprise value.
- Lending: Banks set covenants like Net Debt / EBITDA to cap how much a borrower can leverage.
- Benchmarking: The EBITDA margin (EBITDA / Revenue) compares operating efficiency across peers.
Caution: EBITDA is a non-GAAP measure. It ignores capital expenditures, changes in working capital, and the real cost of replacing assets. A capital-intensive business can show strong EBITDA yet generate little free cash flow. Always pair it with cash flow analysis.
Concrete example
A SaaS company reports:
- Revenue: 10,000,000
- Operating expenses (excluding D&A): 6,500,000
- Depreciation and amortization: 800,000
- Interest expense: 300,000
- Taxes: 600,000
Operating income (EBIT) = 10,000,000, 6,500,000, 800,000 = 2,700,000.
EBITDA = 2,700,000 + 800,000 = 3,500,000, giving an EBITDA margin of 35%.