What Is EBITDA?

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It's a measure of a company's operating profit—how much money the business generates from its core operations before accounting for debt interest, tax obligations, or non-cash charges.

EBITDA is popular among investors, lenders, and business owners because it isolates the cash-generating power of operations from financing and accounting decisions. Two companies with identical operating performance may show very different net profits due to different tax rates, debt levels, or asset depreciation schedules. EBITDA strips those away, making it easier to compare businesses fairly. EBITDA is also widely used as a basis for valuation multiples (e.g., a business "selling at 5× EBITDA").

Formula

EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization

Alternatively: EBITDA = Operating Income (EBIT) + Depreciation + Amortization

Example

Imagine a manufacturing business with $500,000 in revenue and $400,000 in operating costs, yielding $100,000 EBIT. After adding back $20,000 in depreciation and $10,000 in amortization, EBITDA is $130,000. This number tells stakeholders that the business generates $130,000 in cash-based profit from operations, regardless of how the company is financed or taxed.

EBITDA helps you and potential investors understand your core business strength. Finmap breaks down your operating performance and helps you track the metrics that drive EBITDA, so you can see exactly where profit is generated and identify opportunities to improve operational efficiency.