EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a company's core operational profitability, stripping out financing decisions, accounting choices, and tax environments. It is widely used in business valuation and M&A transactions.
EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization
Start with net income from the income statement, then add back interest expense, income tax expense, depreciation expense, and amortization expense. Alternatively: EBITDA = Operating Income (EBIT) + Depreciation + Amortization.
Example 1: Company income statement: Net Income $500K, Interest Expense $80K, Taxes $120K, Depreciation $150K, Amortization $50K
Result: EBITDA = $900,000
Example 2: Using EBIT shortcut: Operating Income (EBIT) = $700K, Depreciation = $150K, Amortization = $50K
Result: EBITDA = $900,000 (same result via shorter route)
Use our free EBITDA Calculator to skip the manual math.
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