EBITDA

EBITDA stands for earnings before interest, taxes, depreciation and amortization. It’s used to eliminate the impact of financing and accounting decisions so businesses can be compared against one another effectively. For example, if a firm has borrowed a lot of money, it’ll have to pay interest – which means less profit. But, in order to compare this business to another business, investors tend to strip out the effect of these interest payments (and such things at the other business, too). This makes it easier to compare how much each company makes, ignoring the financing decisions they’ve made (i.e. borrowing money). It’s the same principle with depreciation and amortization, which are accounting decisions