EBITDA(EBITDA)
Strategy and planning
Strategy and planning
EBITDA is profit before interest, tax, depreciation and amortisation — an approximation of what operations generate.
Because depreciation is excluded, EBITDA is popular with investors and in acquisitions: it makes companies with different investment levels comparable.
It flatters businesses that invest heavily or capitalise software. Always read it alongside EBIT and cash flow.
In practice
EBITDA is often presented as 'profit'. It is not: interest, tax and depreciation still have to be paid.
Related terms
- EBITEBIT is profit before interest and tax: the result from normal operations, including depreciation.
- Gross marginGross margin is revenue minus the direct cost of what you sell, expressed as a percentage of revenue.
- MRR and ARRMRR is your recurring monthly subscription revenue, ARR is the same revenue annualised. One-off projects don't count.