EBITDAView Financial Glossary Index
EBITDA is an abbreviation for earnings before interest, taxes, depreciation, and amortization.
Investors often use EBITDA as a starting point for discounted cash flow analysis or to observe the performance of a business separately from its capital structure (debt vs equity financing structure).
Though EBITDA does form an excellent basis for cash flow analysis, some investors argue that it is a misleading measure since depreciation expenses are a real cost - old property, plant and equipment must eventually be replaced if a business plans to continue operations using those assets.
EBITDA = Net Income + Interest Expense + Tax Expense + Depreciation Expense + Amortization Expense
(All of the expenses are absolute values)