EBITDA
Business & Finance abbreviation · Accounting
| Stands for | Earnings before interest, taxes, depreciation and amortization |
|---|---|
| Categories | Business & Finance |
EBITDA stands for Earnings before interest, taxes, depreciation and amortization, an accounting abbreviation.
Profit measure that adds depreciation and amortization back to EBIT, approximating cash earnings from operations before financing costs, taxes and capital spending. It is widely used to compare companies, value businesses through EV/EBITDA multiples and set debt covenants.
Example: The buyer paid 9 times EBITDA, and the lenders capped total debt at 5.5 times.
Usage notes
Pronounced "EE-bit-dah." EBITDA is not defined under GAAP or IFRS, so companies calculate it differently, and "adjusted EBITDA" can exclude many costs; the SEC requires reconciliation to net income. Critics, including Warren Buffett, have argued that ignoring depreciation treats capital spending as if it were free. The metric became popular with leveraged buyout lenders in the 1980s.
Related abbreviations
More accounting abbreviations
- CY – Calendar year
- D&A – Depreciation and amortization
- Dr – Debit
- DTA – Deferred tax asset
- DTL – Deferred tax liability
- EBIT – Earnings before interest and taxes
- EBITDAR – Earnings before interest, taxes, depreciation, amortization and rent…
- EBT – Earnings before taxes
- EPS – Earnings per share
- FASB – Financial Accounting Standards Board
- FIFO – First in, first out
- FRS – Financial Reporting Standard