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What is the meaning of EBITDA?

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Quick Answer

EBITA is a financial acronym for a company's earnings before interest, depreciation and amortization. It is a company's net income before the specified deductions are excluded. Generally it is used to eliminate the effects of financing and accounting decisions when comparing company and industry profitability.

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EBITA is typically used in comparing businesses with significant investment in equipment that necessitates a high level of depreciation, such as manufacturing. It is also used when a company has acquired a large amount of intangible assets, such as the recent purchase of a brand or another business that requires a high level of amortization. EBITA also provides a more accurate representation of a company's ability to pay for financing, since it shows the amount of cash available to pay interest.

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