Glossary
EBITDA
EBITDA stands for earnings before interest, taxes, depreciation, and amortisation. It measures the profit a business generates from its core operations, setting aside financing choices, tax situations, and non-cash accounting charges. Because it isolates operating performance, EBITDA is a figure often used to compare the underlying health of businesses.
Last updated
EBITDA answers a simple question: how much does the business itself earn from its operations, before decisions about debt, tax, and accounting depreciation are layered on top? Removing those items makes two companies easier to compare even when their financing and tax situations differ, which is why it is so widely cited. It is a useful proxy for operating strength, though not a complete one, since it sets aside real costs such as reinvestment.
As a general measure, EBITDA is one lens for understanding whether a business is genuinely healthy at its core. A company with durable, dependable earnings is, all else equal, a stronger and more enduring business, which is the kind of quality a long-term owner tends to value.