EBITDA is a metric measure that is calculated by adding the net income to interest, income taxes, depreciation and amortization. It is a very popular and often used financial profitability measure. In order to calculate EBITDA, the data must be collected from the income statement and cash flow statement. EBITDA is mostly used to analyze and compare profitability between companies and industries because it helps to avoid the effects of financing and influence of depreciation and amortization accounting policy.

Norms and limitations

Higher value of EBITDA indicates potentially bigger cash flows. However EBITDA is not a relative ratio.

EBITDA is a metric measure that will not indicate how efficiently the assets and resources are used.

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