Investor Glossary-ebitdaInvestor Glossary-ebitdaInvestor Glossary-ebitdaInvestor Glossary-ebitdaInsightful stock market charts - Click here
investor
Categories    # A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

EBITDA

The HTML to link to this page
 

EBITDA or "earnings before interest taxes depreciation and amortization" is a commonly used measure of cash flow. EBITDA can be calculated "top down" by adding back DDA or depreciation and amortization deducted as sales costs to operating income before interest and taxes. EBITDA can also be calculated "bottom up" by adding interest and DDA back to pretax income. For example, to find EBITDA, if the income statement shows $2 million of pretax income and DDA is $12 million and interest expense $6 million, then EBITDA is $20 million. EBITDA became a standard tool for measure cash flow leverage for LBOs in the 980s. An EBITDA/debt ratio at a 2x multiple was considered the limit of safe leverage. EBITDA is often the cash flow measure most often associated with profitability comparison between investments. For example, enterprise value/EBITDA provides a valuation multiple of all of a company's debt and equity times its cash flows. EBITDA is not a GAAP approved accounting measure because EBITDA neutralizes the effects of a company's financing and accounting decisions.



Rate this EBITDA definition...

Learn about investing with the Investor Glossary Term of the Day


Click here for insightful stock market charts. Where is the market headed? The answer may surprise you. Find out
with the exclusive & Barron's recommended charts of Chart of the Day.


Popular Terms: average price per share, labor relations, APR, in escrow, liquidity ratio, retained earnings, cancelled check, required rate of return, quality assurance, annual return, stock market close, VIX, ex-dividend date, FICO score, implied volatility, limit order, stock split, 1031 exchange, wholly-owned subsidiary, EBITDA, option premium, real GDP, ex-dividend, reverse mortgage, inflation, deferred tax, class C shares, dividends payable, command economy, debt service coverage, irrevocable trust, margin rate, minority interest, balance sheet, per diem, FTSE, 1035 exchange, current ratio, risk management, diluted share, 144a, phantom income, LIBOR, open position, Zero Cost Collar, 401a, covered put, deferred revenue, Key Rate Duration


Accounting | Banking | Bonds | Brokers | Economy | Futures | Mutual Funds | Options | Real Estate | Retirement | Stocks | Taxes | Technical Analysis
Home | Term of the Day | Suggest a Term | Chart of the Day | Dogs of the Dow
©2004-2016 Investor Glossary - All rights reserved - Terms of Use