What is EBITDA and why does it matter?

The acronym EBITDA stands for earnings before interest, taxes, depreciation, and amortization. EBITDA is a useful metric for understanding a business's ability to generate cash flow for its owners and for judging a company's operating performance.

What is EBITDA, and why do investors care about it?

In the mid-1980s, investors began to use EBITDA to determine if a distressed company would be able to pay back the interest on a leveraged buyout deal. EBITDA is now commonly used to compare the financial health of companies and to evaluate firms with different tax rates and depreciation policies.

Why is EBITDA so important?

EBITDA is an important financial resource because it can help a company calculate its net profits. This means professionals can use it to assess and compare profitability between industries and organizations because it eliminates capital expenditures and focuses solely on a business's earnings.