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

Formal

One of a number of measures of the profitability of a company - ‘Earnings Before Interest, Tax, Depreciation and Amortisation’ - it defines the cash profitability of the ongoing business excluding non-operating and non-cash expenses. Useful because it allows valuation of underlying businesses inside companies excluding structural and other special items.

Real-world Example

Two companies report the same revenue, but one carries much higher debt and older equipment being depreciated. Comparing their EBITDA - earnings before interest, tax, depreciation and amortisation - strips out those differences to show how their core operations actually perform.