Earnings before interest, taxes, depreciation and amortization (EBITDA) is a widely used indicator of the profitability of the underlying company.
EBITDA is calculated by adding interest, taxes, depreciation and amortization to net income.
EBITDA allows investors to assess a company’s profitability, net of costs, dependent on financial decisions, tax strategy, and discretionary depreciation schedules.
Some, including Warren Buffett, call EBITDA meaningless because it doesn’t take into account capital expenditures.
The US Securities and Exchange Commission (SEC) requires listed companies to reconcile any EBITDA they report against net income and prohibits them from reporting EBITDA per share.