EBITDA is a key financial metric used to assess a company’s profitability before accounting for non-operational expenses like interest, taxes, depreciation, and amortization. It provides insight into how much money a company generates from its operations.

Importance of EBITDA for Businesses:

• Helps businesses and investors evaluate operational profitability.

• Acts as a “scorecard” for understanding how much money a company is making.

• Useful for lenders and investors to gauge a company’s financial health and performance.

How is EBITDA Calculated?

EBITDA is calculated by taking net income and adding back:

• Interest expenses

• Taxes

• Depreciation

• Amortization

Comparison with Net Income:

Net income reflects the remaining profit after accounting for all expenses, including depreciation and taxes, whereas EBITDA excludes these to provide a clearer picture of operational performance.