WHAT IS AN EBITDA CALCULATION?
In the context of business valuation, the EBITDA metric holds a special position. It is one of the key measures for investors, banks, and potential buyers—especially in the context of company sales, equity stakes, or strategic decisions.
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization.
Specifically, EBITDA shows how profitable a company’s core operations are without distortions from factors such as:
– Financing structure (interest), individual tax burden, or accounting depreciation (e.g., on machinery or patents).
Investors place great value on comparability, and EBITDA enables exactly that: it provides an objective view of a company’s operational performance. It neutralizes company-specific accounting and financing decisions that often obscure true business results.
EBITDA is calculated as follows:
Net income
+ Interest expense
+ Income taxes
+ Depreciation of tangible assets
+ Amortization of intangible assets
= EBITDA
