EBITDA
EBITDA is a financial metric that shows how a business performs before interest, taxes, depreciation, and amortization. It highlights core profitability, stripped of financing and accounting noise.
What EBITDA really tells you
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It shows how much profit a company generates from its operations—without the noise of financing decisions, tax structures, or accounting policies.
It’s used as a proxy for core performance. Investors rely on it to compare businesses with different capital structures. Operators use it to track consistency over time. In M&A, it’s a common reference point for valuation multiples and deal terms.
It doesn’t show cash flow. It doesn’t reflect capital efficiency. But it provides a clean view of operational strength.
Why this metric still matters
Imagine two companies with similar revenue. One has heavy debt and high depreciation costs. The other is lean and asset-light. On paper, their net incomes differ sharply. But when you look at EBITDA, the operational gap is much smaller.
That’s the value of this metric—it levels the playing field. It tells you how the core engine runs, regardless of how it’s financed or taxed.
It also simplifies comparisons. A buyer doesn’t need to untangle accounting details. They can focus on recurring performance.
What EBITDA hides
It’s not the full picture. It ignores capital costs, ignores debt, and ignores working capital needs. A company can show strong EBITDA while bleeding cash.
It’s not GAAP-compliant either. That makes it easy to manipulate. Different companies may calculate it differently, depending on what they include or exclude.
And it’s not a substitute for real diligence. It’s a headline number, not a verdict.
A starting point, not a conclusion
EBITDA helps create clarity—but only if used wisely. It gives operators and investors a clean lens on operating performance. But no metric works in isolation.
If your business looks great on EBITDA, ask yourself: what is it not telling me? Use it to open the financial story, not to close it.
Profitability starts here. But sustainability lives beyond it.
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