EBITDA

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a financial metric used to evaluate a company’s operating performance by focusing on earnings derived from core business operations without the impact of Capital structure, tax rates, and non-cash accounting items.

EBITDA is calculated using the formula:

EBITDA = Revenue – Expenses (excluding interest, taxes, Depreciation, and Amortization)

For example, if a company has:

• Revenue: $1,000,000
• Cost of Goods Sold (COGS): $400,000
• Operating Expenses: $300,000

Then:

EBITDA = $1,000,000 – $400,000 – $300,000 = $300,000

In another case, consider a company with:

• Revenue: $2,500,000
• Interest: $100,000
• Taxes: $200,000
• Depreciation: $150,000
• Amortization: $50,000
• Other Operating Expenses: $1,500,000

EBITDA in this case would be:

EBITDA = $2,500,000 – $1,500,000 = $1,000,000