EBITDA

Earnings before interest, tax, depreciation and amortisation (EBITDA) is a number that some analysts prefer to use as a profits measure when analysing companies.

It tries to solve some of the weaknesses inherent in the profits after tax figure. In particular it takes out two of the more subjective costs – depreciation and amortisation of fixed assets – in an attempt to get closer to a cash based profits figure. It also removes interest, a financing cost, and tax. As a result EBITDA will usually be a higher number than profit after tax.