In corporate finance, what does EBITDA measure before interest, taxes, depreciation, and amortization?

In corporate finance, EBITDA means earnings before interest, taxes, depreciation, and amortization.

The measure starts with earnings and adds back interest, income taxes, depreciation, and amortization. It is often used to compare operating performance among companies with different debt levels, tax situations, or asset bases.

EBITDA is not the same as cash flow. It excludes capital spending, changes in working capital, and several other cash expenses. It also does not represent profit under generally accepted accounting principles. Critics therefore warn that it can make highly indebted or capital-intensive businesses look stronger than they are.

The acronym became widely used in financial analysis during the late twentieth century. Investors commonly pair it with enterprise value to calculate an EV/EBITDA valuation multiple, while lenders may use it when assessing debt capacity.