Earnings Before Interest, Taxes, and Amortization (EBITA)


The accounting technique EBITDA — earnings before interest, taxes, depreciation and amortization — is an important standard measure of profitability.
EBITDA gained popularity in the 1980s, at the height of the leverage buyout era. What makes EBITDA valuable is that unlike standard net income calculations that use a simple formula of revenueminus expenses, EBITDA factors in other expenses, like taxes and interest. EBITDA allows analysts to generate useful comparisons between companies, and to project long-term profitability and the ability to pay off future financing.

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