What does EBITDA stand for?

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. This financial metric is used to assess a company's operating performance and profitability by focusing on earnings from core business operations, excluding the effects of capital structure and tax regimes.

The term emphasizes that EBITDA calculates earnings by omitting the impact of interest expenses related to debt financing, taxes which can vary widely between jurisdictions, and non-cash expenses like depreciation and amortization. This makes it easier for investors and analysts to compare the profitability of different companies on a more standardized basis, without distortions from financial and tax-related practices.

Using EBITDA helps to present a clearer picture of operational efficiency and allows stakeholders to evaluate a firm's potential for cash generation from its ongoing activities.