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What is the formula for calculating EBITDA?
EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortization.
Formula for EBITDA is
EBITDA = Revenue - Expenses excluding interest, taxes, depreciation and amortization
OR
EBITDA = Operating Profit (EBIT) + Depreciation Expense + Amortization Expense
EBITDA = Revenue – Expenses (excluding tax, interest, depreciation, and amortization)
EBITDA is a financial performance measure that has appeared relatively recently. It stands for earnings before interest,taxes depreciation and amortisation and is particularly popular with high-tech startup business.
Consideration of earnings before interest and tax has long been common- before interest in order to measure the overall profitability before any distributions to providers and capital, and before tax on the basis that this is not under direct control of management.
The reason that EBITDA additionally considers the profit before depreciation and amortisation is in order to approximate to cash flow, on the basis that depreciation and amortisation are non-cash expenses.
EBITDA (Earnings before Income Tax, Depreciation and Amortization) = Revenue - Expenses (Except Income Tax, Depreciation and Amortization)
EPITDA = (Revenue - Expenses)+ Depreciation+ Amortization
For example, some businesses use only operational income, also called revenue, as the sole source of earnings in the calculation. When using this definition of earnings, EBITDA is most closely related to operating profit. At least in theory, the exclusion of expenses for the amortization and depreciation of assets is the only real difference between these two figures. Since operating profit is reported on a company's income statement, the simplest way to calculate EBITDA is to start with the GAAP figure and work backwards.
EBITDA = Operating Profit + Amortization Expense + Depreciation Expense
Assume company ABC has an annual operating profit of $,, amortization expenses of $, and depreciation costs of $,. Using the above formula, the EBITDA is $, + $, + $,, or $,.
