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EBITDA, or earnings before interest, taxes, depreciation and amortization, is a measure of a company's overall financial performance and is used as an alternative to simple earnings or net income in some circumstances.
EBITDA, however, can be misleading because it strips out the cost of capital investments like property, plant, and equipment.
This metric also excludes expenses associated with debt by adding back interest expenses and taxes to earnings. Nonetheless, it is a more precise measure of corporate performance since it is able to show earnings before the influence of accounting and financial deductions.
Simply put, EBITDA is a measure of profitability. While there is no legal requirement for companies to disclose their EBITDA, according to the U.S.accounting principle generally accepted accounting principles (GAAP), it can be worked out and reported using information found in a company's financial statements.
The earnings, tax, and interest figures are found on the income statement, while the depreciation and amortization figures are normally found in the notes to operating profit or on the cash flow statement. The usual shortcut to calculate EBITDA is to start with operating profit, also called earnings before interest and taxes (EBIT) and then add back depreciation and amortization.
EBITDA are the earnings which an organization earned after deducting those expenses which are directly related to the core operation of the business, or we can say that those outgoing economic resources which are generating the cash or income to the business. We can summarize it in the form as below
Sales/Revenues
(COGS)
EBITDA
EBITDA is a measure of Company's operating performance. This figure represents what an entity earned before the deduction of taxes, depreciation, interest on loans and reduction for amortization, a paying of debts for over time. Many will use this number to represent how efficient a Company is in its operation in comparision to another similar business.
This is profit after deducting all direct and indirect expenditures from sales.
EBITDA is the profit after deduction of all expenses like direct cost and indirect cost and at the end deduction of taxes & depreciation
EBITDA is earnings before interest, taxes, depreciation, and amortization. It measures the overall profitability of the company.
To get net income from EBITDA, subtract depreciation/amortization, interest expense, and taxes from EBITDA.
EBITDA = EBIT + DEPRECIATION + AMORTIZATION
EBITDA MARGIN = EBITDA/TOTAL REVENUE
Logically it is gross profit.
EBITDA in simple terms is referred as the revenue after all major expenses of the company like production cost such as salaries, distribution cost such as transportation, administrative cost such as finance charges etc are been deducted from the Gross profit before taxes and depreciation are being computed.
Hi,
EBITDA, it's a way to evaluate a company's performance without having to factor in financing decisions, accounting decisions or tax environments.
you calculate it in two ways:
1- EBITDA= Revenue - (COGS + G&A expenses)
2-EBITDA= Net Income + Interest expenses +Taxes+ Depreciation + Amortization
hope that help you
