Cash flow
EBITDA
Earnings before interest, tax, depreciation and amortisation. A rough measure of operating profit before accounting charges for wearing out equipment.
Formula
EBITDA = Operating income (EBIT) + Depreciation & amortisation
Worked example
- Operating income (EBIT) = $2.0bn
- + Depreciation & amortisation = $500m
Result: $2.5bn
How to read it
Popular for comparing companies, but it ignores the real cost of replacing equipment, so treat it with care for capital-heavy businesses.
Worked example uses made-up figures for 'Example plc'
See it with real numbers: Any company page → (free account)