Glossary
- EBITDA
- EBITDA, or 'earnings before interest, tax, depreciation and amortisation', is a common ratio used by investors to evaluate a firm. It shows how much money a company is making before the distorting effect of taxes, depreciation and other accounting charges. It is often used by bankers and brokers in leveraged buyouts as a means of comparing a company with others of similar size in the same industry. Investors and potential buyers often look to see whether EBITDA grows over time to get a sense of future potential profitability. However, because EBITDA excludes expenses such as capital expenditures and cash required for working capital, it is not a full proof measure of profitability.
