EBITDA

How to read it

EBITDA is earnings before interest, taxes, depreciation and amortization, taken as a reported line of the income statement. It starts from operating results and leaves out the cost of financing, the tax bill and the accounting charges that spread the cost of past investment over time. It rises when revenue grows or operating costs fall, and it is unaffected by how much debt the company carries or how its assets are depreciated. stockrow shows it for the trailing twelve months, for quarters and for years, in millions in statement tables.

What is typical

How much EBITDA a company produces for each unit of sales varies with the kind of business. Asset-heavy businesses such as telecoms, utilities and pipelines often show large EBITDA because their depreciation is large, while service and retail businesses show less. EBITDA feeds EBITDA Margin, Enterprise Value over EBITDA and Net Debt/EBITDA; compare those ratios with the sector medians rather than judging the raw amount.

Pitfalls

EBITDA is not cash: it ignores the capital spending needed to replace worn-out assets, changes in working capital, interest and taxes, all of which a business still has to pay. Companies differ in what they treat as one-off items, so the line is not always defined the same way from one company to the next.