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Term · Profitability & Growth

EBITDA

Core
In briefEBITDA is earnings before interest, taxes, and all depreciation and amortization on tangible and intangible assets. For small caps it makes operating earnings power comparable despite differing depreciation and financing profiles.

Definition

EBITDA denotes earnings before interest, taxes, depreciation on tangible assets, and amortization on intangible assets.

How it is calculated

Formula. EBITDA = EBIT + depreciation + amortization; as a non-standardized metric, the definition and adjustments must be reviewed.

Why it matters for small caps

EBITDA is frequently used for small caps to make operating earnings power comparable before the effects of depreciation and financing structure.

Common misreadings

  • EBITDA is often wrongly understood as cash flow, even though working capital, taxes, interest, and investments are not taken into account.

In the process

→ Used in Step 3 – Financial traffic-light

Frequently asked

What is EBITDA?
It is an earnings measure that excludes interest, taxes, and all depreciation and amortization. This brings the operating performance before these effects to the fore.
How is EBITDA formed and used?
You add depreciation and amortization to EBIT; as a non-standardized figure, the definition and adjustments must be reviewed. It is used for the operating comparison of companies with differing capital intensity.
Why is EBITDA not cash flow?
It excludes working capital, taxes, interest, and investments. Anyone equating EBITDA with available liquidity easily overestimates financial strength.

Related terms

EBITEV/EBITDAFree Cash FlowCapex

Sources

Primary
Methodology
Category: Profitability & Growth · Earnings MetricsRelevance: CoreJurisdiction: International

Education only, not investment advice. Ranges and thresholds are didactic orientation values, not an official standard.