Financial StatementsIntermediate

EBITDA

Earnings Before Interest, Tax, Depreciation and Amortisation

Operating profit before interest, tax and non-cash depreciation charges.

Detailed explanation

EBITDA strips out financing choices, tax and accounting charges so you can compare the operating earnings of companies with different debt and asset bases. It is the base for the EV/EBITDA multiple used widely in investment banking.

Formula

EBITDA = Net profit + Interest + Tax + Depreciation + Amortisation

Example

Net profit ₹52 cr + interest ₹10 cr + tax ₹18 cr + D&A ₹20 cr = EBITDA ₹100 cr.

Why it matters

It is the standard operating-earnings number in deal valuation and loan covenants.

Key points

  • Not a cash-flow figure: ignores capex and working capital.
  • Not defined by accounting standards, so check how it is calculated.
  • EBITDA margin = EBITDA ÷ Revenue.

Related terms

EBITEV/EBITDAEnterprise Value

More in Financial Statements

Income StatementRevenueCost of Goods SoldGross MarginEBITOperating Margin

Educational content only. Definitions and examples are illustrative and are not investment, tax or legal advice.