Tag: ebitda

So what does it mean? Often times, we are focused on what the bottom line says (net income), but it’s also important to look at what goes into it to see how the company is really doing, which is what EBITDA helps with.

To calculate EBITDA, take the sum of net income, interest expense, taxes, depreciation, and amortization. Each line item in the EBITDA (earnings before interest, taxes, depreciation, and amortization) calculation is found on a company’s income statement, commonly referred to as a profit and loss statement.

What sounds like accounting jargon is essentially a formula for calculating the basic earning power of a business.