Overview

Earnings before interest, taxes, depreciation, and amortization (EBITDA) is one of the most frequently used financial metric by finance professionals to assess a company's financial performance. Sometimes, it is used as a proxy for cash flow from a company's operations. EBITDA removes factors which business owners have discretion over, such as debt financing, capital structure, depreciation methods, and taxes. Thus, it allows companies to measure their performance without the impact of their capital structure. The formula for calculating EBITDA is as follows:

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

or

EBITDA = Operating Profit + Depreciation + Amortization

The EBITDA metric can be used to provide an estimate on the value of a company by multiplying it by a valuation multiple (e.g. EV/EBITDA) obtained from equity research reports, comparable company analysis, or M&A precedent transactions.

Share
Reviews Add a review
No reviews yet

More From Corporate Finance Institute®

Browse our top rated business templates. See All
Energy Industry Comps Template Energy Industry Comps Template
282
18
This energy industry comps template provides a guideline and example of what a comparables universe would look like for a…
Financial Institution Dividend Discount Model
873
19
The financial institution dividend discount model uses future dividends to find the implied share price. This model is based on…
Loan Payment Calculator
549
0
The loan payment calculator allows users to determine the principal and interest payment each month until the full balance of…
DDM - Excel Dividend Discount Model Template
685
55
The dividend discount model template allows investors to value a company base on future dividend payments. This is based on…
Non-directional trading strategy template Non-directional Trading Strategies Template
601
0
The non-directional trading strategies template allow users to determine the profit when buying options. This template focuses on non-directional strategies…
restructuring financial model template preview 1 Restructuring Financial Model Template
871
0
This restructuring financial model template is used to demonstrate the financial interactions behind the restructuring process. Adjust this model to…