What does EBITDA stand for?

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. This financial metric is widely used as it provides a clearer view of a company's operational performance by excluding costs that may obscure the underlying profitability.

The terms included in EBITDA highlight that it measures the earnings generated from core operations without considering the effects of capital structure (interest), tax strategies (taxes), and non-cash elements (depreciation and amortization). By focusing on these earnings, investors and analysts can better evaluate a company's operational efficiency and perform comparisons across companies and industries.

Understanding EBITDA can be particularly valuable in assessing a company's ability to generate cash flows from operations, which is indicative of financial health and potential for growth. This metric is commonly used in valuation, performance analysis, and as a benchmark for operating performance.