What is EBITDA?

EBITDA is a company's earnings before interest, taxs, depreciation and amortisation.

It is generally used to comparison of profitability between two companies by discounted the effect of interest payment.

EBITDA can be used to compare companies against each other and industry averages.

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

EBITDA can be used as a shortcut to estimate the cash flow available to pay the debt of long term assets.

EBITDA, however, can be misleading because it strips out the cost of capital investments like property, plant, and equipment.

Negative EBITDA indicates that a business has fundamental problems with profitability and cash flow.

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