What is EBITDA?EBITDA stands for Earnings Before Interest,...

What is EBITDA?

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization and is a metric used to evaluate a company’s operating performance. It can be seen as a loose proxy for cash flow from the entire company’s operations.

The EBITDA metric is a variation of operating income (EBIT) that excludes certain non-cash expenses. The purpose of these deductions is to remove the factors that business owners have discretion over, such as debt financing, capital structure, methods of depreciation, and taxes (to some extent). It can be used to showcase a firm’s financial performance without the impact of its capital structure.

EBITDA is not a recognized metric in use by IFRS or US GAAP. It does not account for the depreciation of a company’s assets.

For example, if a company has a large amount of depreciable equipment (and thus a high amount of depreciation expense), then the cost of maintaining and sustaining these capital assets is not captured. (So for us its not really an issue as we are building towards having new company assets) (in fact i am going to buy them a shovel to help out and get this pony moving)

Rome was not built in a day.