EBITDA definition

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EBITDA stands for ‘earnings before interest, taxes, depreciation and amortisation’. It is calculated by taking away the above figures from a company’s total revenue, to give an idea of the profit made before tax and other financial factors are taken into account.

EBITDA can be of use when comparing companies in different industries, or assessing a business that has high value expenses that detract from net profits. Today, most companies will report an EBITDA figure as part of their regular earnings releases, as it presents a way of demonstrating profitability outside of generally accepted accounting principles (known as GAAP).

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