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
