EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization)

What is EBITDA?

EBITDA stands for earning before interests, taxes, depreciation and amortization, which means it represents the value that is left after adding interests, taxes, depreciation and amortization from a given company NET Income.

EBITDA is commonly used by companies, investors and individuals to evaluate businesses as it represents the performance of an operation isolated from their costs of capital used to support the business.

As any kind of business KPI, this should not be evaluated alone, but together with other factors - such as Net Income, LTV, CAC, WACC and other factors depending on the business strategy and maturity.

How to calculate EBITDA?

Calculating EBITDA starts from gathering all revenue information and then deducting from this amount cost of goods sold (COGS) and expenses (G&A).

Revenue - COGS - Expenses = EBITDA

EBITDA - interests - taxes - depreciation - amortization = NET Income


Learn more about NET Income here

Taxes are monetary figures of the taxes applied directly over those sales (i.e. 2,000 USD - usually called VAT)

Interests, if applicable, are monetary figures associated with the cost of the capital used to support those sales and/or activities

Depreciation and amortization are monetary figures associated with companies' assets and technology development

EICOM Institute also recommends that you take a look at this article from Investopedia to learn more.

See also

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