Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA)

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Earnings Before Interest, Tax, Depreciation and Amortization (EBITDA) is a metric for measuring a company’s operating performance. It is an alternative method for evaluating a company’s performance without factoring in financial, accounting or tax decisions.

EBITDA= Earnings before Interest and Tax (EBIT) OR Operating Profit + Depreciation + Amortization

OR

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

EBITDA is used to analyze and compare the profitability among different companies and industries which is calculated from the information found in a company’s financial statements. The earnings, tax and interest values are found in the income statement while depreciation and amortization values in the notes to operating profit or in cash flow statement.

Companies tend to highlight their EBITDA value when their Net Income is not impressive. It can be sometimes used to distract investors from showing a company’s lack of profitability. Certain management personnel argue that using EBITDA gives a better picture of the profits of a company when expense accounts associated with capital is excluded. There is nothing misleading in using EBITDA as a metric for growth, but sometimes it tends to overshadow the actual financial performance and risks of a company i.e, it provides an incomplete picture of a company’s financial health.

Rajagiri Center for Business Studies Kochi is one of the top business schools in Kerala India offering various post graduation courses such as MBA, MHRM, PGDM etc. Rated as one of the Top B Schools in Kerala, this institution offers you  a serene environment, better hostel and learning facilities, improved internship programs and top placements to leading brands across the globe. With international facilities and the guidance from the well-experienced faculties, RCBS, top MBA college in Kerala remains the best choice for higher education.

To Know More https://rcbs.rajagiri.edu/

Location: Kerala, India

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