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Home > QFINANCE Dictionary > Definition of earnings before interest, tax, depreciation, and amortization

Definition of

earnings before interest, tax, depreciation, and amortization

Accounting

use of earnings to measure firm's performance the earnings generated by a business's fundamental operating performance, frequently used in accounting ratios for comparison with other companies. Interest on borrowings, tax payable on those profits, depreciation, and amortization are excluded on the basis that they can distort the underlying performance.

It is calculated as follows:

EBITDA = Revenue − Expenses (excluding tax and interest, depreciation, etc.)

It is important to note that EBITDA ignores many factors that impact on true cash flow, such as working capital, debt payments, and other fixed expenses. Even so, it may be useful for evaluating firms in the same industry with widely different capital structures, tax rates, and depreciation policies.

Related definitions of "earnings before interest, tax, depreciation, and amortization"

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Definitions of ’earnings before interest, tax, depreciation, and amortization’ and meaning of ’earnings before interest, tax, depreciation, and amortization’ are from the book publication, QFINANCE – The Ultimate Resource, © 2009 Bloomsbury Information Ltd. Find definitions for ’earnings before interest, tax, depreciation, and amortization’ and other financial terms with our online QFINANCE Financial Dictionary.

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