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What is EBITDA?

EBITDA: Profit before interest, taxes, depreciation and amortization.

Where EBITDA fits

EBITDA is part of Profit & Margins in Accounting. Profit has layers: revenue minus COGS is gross profit, minus operating costs is operating profit, and after interest and tax is net income. Margins show each as a percent of revenue.

Practical tip

Watch margins, not just totals; growth with shrinking margins is a warning.

Related terms

Revenue
Total money a company earns from sales before costs.
Gross margin
Share of revenue left after direct production costs.
Net income
What remains after all expenses and taxes.
Operating profit
Profit from core operations before interest and taxes.

Formulas you will use with it

Profit marginOperating marginGross marginNet profit margin

Test yourself

Which term means: “Profit before interest, taxes, depreciation and amortization.”?

EBITDA · Revenue · Net income

Answer: EBITDA

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