EBITDA
Also called earnings before interest, taxes, depreciation and amortization
Reviewed by Dasha ShakovVP Marketing, Proton
Updated
What is EBITDA?
EBITDA (earnings before interest, taxes, depreciation and amortization) is a company’s operating profit before financing costs, taxes and non-cash charges. Those non-cash charges are depreciation and amortization, and EBITDA is widely used to compare companies and to value them in acquisitions, as a multiple such as “seven times EBITDA.”
EBITDA example
At seven times EBITDA, a distributor earning $5 million of EBITDA is valued at about $35 million before accounting for its debt.
Related terms
- Net marginNet margin is the percentage of revenue a company keeps as profit after all expenses, including COGS, operating expenses, interest and taxes.
- Private equity roll-upA private equity roll-up is a strategy in which an investment firm buys one company as a platform, then adds smaller ones in the same industry.
- Gross margin return on inventory investment (GMROI)Gross margin return on inventory investment (GMROI) is the gross profit a distributor earns for each dollar it has invested in inventory.
