# EBITDA

> Earnings before interest, taxes, depreciation and amortization, a common proxy for operating profit before financing and non-cash charges.

Source: https://www.quantisnow.com/glossary/ebitda
Topic: Glossary / Earnings and fundamentals
Also known as: adjusted EBITDA, earnings before interest, taxes, depreciation and amortization
Last updated: 2026-10-27

EBITDA stands for earnings before interest, taxes, depreciation and amortization. It is a [non-GAAP](https://www.quantisnow.com/glossary/non-gaap) measure that approximates a company's operating profitability before the effects of capital structure, tax jurisdiction and non-cash charges for long-lived assets.

## How it works

The usual build:

EBITDA = net income + interest expense + income taxes + depreciation + amortization

or, equivalently, operating income (EBIT) + depreciation + amortization.

Companies frequently report **adjusted EBITDA**, which strips out additional items such as stock-based compensation, restructuring costs, acquisition expenses and impairments. Because definitions vary, adjusted EBITDA for two companies is often not comparable. SEC rules require a reconciliation to net income when a company presents it.

EBITDA is the basis for common ratios:

- **EV/EBITDA:** enterprise value (market cap plus net debt) divided by EBITDA, a valuation multiple that is neutral to capital structure.
- **Net debt/EBITDA:** a leverage measure used in loan covenants and by credit rating agencies.
- **EBITDA margin:** EBITDA divided by revenue.

## Why it matters for traders

EBITDA is popular for comparing companies with different debt loads and for valuing capital-heavy businesses, buyouts and turnarounds. Its weakness is that it ignores real costs: capital spending to maintain assets, interest that must be paid, taxes and working capital. A company can have positive EBITDA and still burn cash. Compare it with [free cash flow](https://www.quantisnow.com/glossary/free-cash-flow), and watch how many add-backs separate reported EBITDA from net income.

## Example

Cobalt Ridge Mining (ticker CBRM) reports annual net income of $40 million, interest expense of $30 million, income taxes of $15 million, and depreciation and amortization of $65 million. EBITDA is 40 + 30 + 15 + 65 = $150 million. With net debt of $450 million, net debt/EBITDA is 3.0x.

## FAQ

### Is EBITDA the same as cash flow?

No. It excludes capital expenditures, interest, taxes and working capital changes, all of which affect cash.

### Why do companies use adjusted EBITDA?

To show profitability excluding items they view as non-recurring or non-cash, though definitions vary by company.

## Related terms

- [Non-GAAP earnings](https://www.quantisnow.com/glossary/non-gaap.md): Earnings figures adjusted by a company to exclude items such as stock compensation, amortization or one-time charges, which must be reconciled to GAAP.
- [Free cash flow](https://www.quantisnow.com/glossary/free-cash-flow.md): The cash a company generates from operations after capital expenditures, available for debt repayment, dividends, buybacks or acquisitions.
- [Earnings per share (EPS)](https://www.quantisnow.com/glossary/earnings-per-share.md): A company's net income available to common shareholders divided by its weighted average shares outstanding, reported as basic and diluted figures.
- [Market capitalization](https://www.quantisnow.com/glossary/market-capitalization.md): The total market value of a company's outstanding shares, calculated as the share price multiplied by the number of shares outstanding.
- [Price-to-earnings ratio (P/E)](https://www.quantisnow.com/glossary/pe-ratio.md): A valuation multiple equal to a stock's share price divided by its earnings per share, showing how much investors pay for each dollar of profit.

## On Quantisnow

- [How to read an earnings report](https://www.quantisnow.com/guides/how-to-read-an-earnings-report)
- [Live feed: Financials](https://www.quantisnow.com/news/financials)
- [Earnings announcements](https://www.quantisnow.com/categories/earnings)