The usual shortcut for calculating EBITDA is to start with operating profit, also called earnings before interest and taxes (EBIT), then add back depreciation and amortization
There are two distinct EBITDA formulas, one based on net income and the other on operating income
The respective EBITDA formulas are: ,
If a company doesn’t report EBITDA, it can be easily calculated from its financial statements
The earnings (net income), tax, and interest figures are found on the income statement, while the depreciation and amortization figures are normally found in the notes to operating profit or on the cash flow statement
What it Reveals About Your Business What Is EBITDA? EBITDA, which stands for earnings before interest, taxes, depreciation and amortization, is a formula to measure a company’s financial health and ability to generate cash flow
EBITDA or Earnings Before Interest, Tax, Depreciation, Amortization is a company's profits before any of these net deductions are made
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Investors using solely EBITDA to assess a company’s value or results risk getting the wrong answer
Earnings before interest and taxes (EBIT), as mentioned earlier, is a company’s net income excluding income tax expense and interest expense
EBIT is used to analyze the profitability of a company’s core operations
If a company doesn’t report EBITDA, it can be easily calculated from its financial statements
The earnings (net income), tax, and interest figures are found on the income statement, while the depreciation and amortization figures are normally found in the notes to operating profit or on the cash flow statement
EBITDA is a business analysis metric developed in the 1970s by John C
Malone, the former president and CEO of cable and media giant Tele-Communications Inc
With this formula, you can project a company’s long-term profitability and gauge its ability to repay future financing
