Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)

Date created: Feb 17, 2019  •   Last updated: Feb 1, 2022

What is Earnings Before Interest, Taxes, Depreciation, and Amortization?

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) is one of a few profit metrics. At its simplest, EBITDA focuses only on operational profitability, ignoring non-cash expenses by adding them back to Net Income.

Earnings Before Interest, Taxes, Depreciation, and Amortization Formula

ƒ Sum(Net Profit + Interest +Taxes + Depreciation + Amortization)

How to calculate Earnings Before Interest, Taxes, Depreciation, and Amortization

EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization If a company has: $50 million in Revenue $10 million in Costs of Goods Sold (COGS) $15 million in Operating Expenses $5 million Depreciation and Amortization Expense $2 million in Interest Expense $3 million in Taxes Net Income = 50 - 10 - 15 - 5 - 2 - 3 = $15 million EBITDA = $15 + 2 + 3 + 5= $25M

Start tracking your Earnings Before Interest, Taxes, Depreciation, and Amortization data

Use Klipfolio PowerMetrics, our free analytics tool, to monitor your data. Choose one of the following available services to start tracking your Earnings Before Interest, Taxes, Depreciation, and Amortization instantly.

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How to visualize Earnings Before Interest, Taxes, Depreciation, and Amortization?

There are many way to visualize EBITDA, but bar charts and line charts are the most common data visualizations associated with this metric. A bar chart can help you quickly identify high-performing years while a line chart helps you view changing trends over time.

Earnings Before Interest, Taxes, Depreciation, and Amortization visualization examples

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Earnings Before Interest, Taxes, Depreciation, and Amortization

Line Chart

Here's an example of how to visualize your Earnings Before Interest, Taxes, Depreciation, and Amortization data in a line chart over time.
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Earnings Before Interest, Taxes, Depreciation, and Amortization

Bar Chart

Here's an example of how to visualize your Earnings Before Interest, Taxes, Depreciation, and Amortization data in a bar chart to observe segmented data.
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Earnings Before Interest, Taxes, Depreciation, and Amortization

Line Chart

Here's an example of how to visualize your Earnings Before Interest, Taxes, Depreciation, and Amortization data in a line chart over time.

More about Earnings Before Interest, Taxes, Depreciation, and Amortization

EBITDA is used by executives as an indicator of a company's financial value and often serves as a proxy for understanding a business’ earning potential. It’s an effective way for founders and investors to compare two similar companies within the same industry. You need to be cautious when using EBITDA as a measure of success because it doesn’t properly account for the cash available to the business.

For example, it does not take into consideration the timing between when costs are incurred in the making of a product and when revenue is generated from its sale. By definition EBITDA ignores the interest and taxes a company must pay as well as the costs associated with depreciation and amortization of past investments.