EBITDA
What is EBITDA?
EBITDA, or earnings before interest, taxes, depreciation, and amortization, is a different measure of profitability than net income. EBITDA, which includes depreciation and amortization as well as taxes and debt service expenses, seeks to depict the cash profit created by the company’s activities.
What is amortization?
Amortization is the process of gradually depreciating the book value of a company’s intangible assets. Amortization is shown on a company’s income statement. Intellectual property (patents or trademarks) and goodwill are examples of intangible assets.
What is good EBITDA?
EBITDA is a measure of a company’s profitability; higher is typically better. From the standpoint of an investor, a “good” EBITDA is one that gives further insight into a company’s performance while not losing sight of the fact that the statistic excludes cash outlays for interest and taxes, as well as the ultimate cost of replacing its tangible assets.
What is the formula of EBITDA?
EBITDA = Net Income + Taxes + Interest Expense + D&A
or
EBITDA = Operating Income + D&A
Does EBITDA includes cash flows?
EBIT does not represent the business’s cash flows. Cash flow details are an important sign of whether a firm can pay its short- and long-term financial obligations, which will determine its future growth chances.
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