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A company's earnings before interest, taxes, depreciation, and amortization (commonly abbreviated EBITDA, [1] pronounced / ˈ iː b ɪ t d ɑː,-b ə-, ˈ ɛ-/ [2]) is a measure of a company's profitability of the operating business only, thus before any effects of indebtedness, state-mandated payments, and costs required to maintain its asset base.
If you've read or listened to the earnings reports of companies you follow, you've probably heard the term "EBITDA." But what exactly does it mean, and why is it important? Why do some companies ...
One popular metric that analysts and other financial advisors use for determining the success of a company is EBITDA. It measures a company's earnings, excluding certain …
A financial ratio or accounting ratio states the relative magnitude of two selected numerical values taken from an enterprise's financial statements. Often used in accounting , there are many standard ratios used to try to evaluate the overall financial condition of a corporation or other organization.
A professional investor contemplating a change to the capital structure of a firm (e.g., through a leveraged buyout) first evaluates a firm's fundamental earnings potential (reflected by earnings before interest, taxes, depreciation and amortization and EBIT), and then determines the optimal use of debt versus equity (equity value).
EBITDA, which is not required to be included in an income statement, focuses on the operating performance of a business. Revenue, which is always reported on a business income statement, consists ...
A ratio's values may be distorted as account balances change from the beginning to the end of an accounting period. Use average values for such accounts whenever possible. Financial ratios are no more objective than the accounting methods employed. Changes in accounting policies or choices can yield drastically different ratio values. [6]
Return on capital employed is an accounting ratio used in finance, valuation, and accounting. It is a useful measure for comparing the relative profitability of companies after taking into account the amount of capital used.