Earnings before interest, taxes, depreciation, and amortization (EBITDA) is a measure of a company's overall financial performance, calculated by adding back interest, taxes, depreciation, and amortization expenses to net income.

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Why are earnings before interest, taxes, depreciation, and amortization (EBITDA) important?

EBITDA is important because it helps investors and analysts compare the financial performance of different companies by eliminating the effects of financing and accounting decisions.

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An easy way to understand earnings before interest, taxes, depreciation, and amortization (EBITDA) is:

Think of it as a company's profits before accounting for non-operating expenses like interest, taxes, depreciation, and amortization. It focuses on the core business performance.

Formula of EBITDA

How To Use The Metrics Earnings Before Income and Taxes (EBIT)

EBIT is used to evaluate a company's operating profitability without considering the impact of financing and tax decisions. To calculate EBIT, start with a company's net income and add back interest and taxes.

Investors and analysts use EBIT to compare the operational performance of different companies, regardless of their capital structure or tax rates. A higher EBIT indicates a company is more profitable at its core business operations.

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Formula of EBITDA

EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization

To calculate EBITDA, start with a company's net income, then add back interest expenses, taxes, depreciation, and amortization. This formula eliminates the effects of financing and accounting decisions, providing a clearer picture of a company's operational performance.

Tracking EBITDA has been crucial in evaluating our operational performance excluding non-cash expenses. It provided a clearer picture of our operational profitability and cash flow, enabling more informed decisions regarding expansions and upgrades in our treatment technologies and facilities.