EBITDA Template

EBITDA Template

This EBITDA template will show you how to calculate EBITDA using the income statement and cash flow statement.

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EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization and is a metric used to evaluate a company’s operating performance. It can be seen as a proxy for cash flowCash FlowCash Flow (CF) is the increase or decrease in the amount of money a business, institution, or individual has. In finance, the term is used to describe the amount of cash (currency) that is generated or consumed in a given time period. There are many types of CF from the entire company’s operations.

The metric is a variation of the operating income (EBITEBIT GuideEBIT stands for Earnings Before Interest and Taxes and is one of the last subtotals in the income statement before net income.  EBIT is also sometimes referred to as operating income and is called this because it's found by deducting all operating expenses (production and non-production costs) from sales revenue.) because it excludes non-operating expenses and certain non-cash expenses. The purpose of these deductions is to remove the factors that business owners have discretion over such as debt financing, capital structure, methods of depreciationDepreciation ExpenseDepreciation expense is used to reduce the value of plant, property, and equipment to match its use, and wear and tear, over time. Depreciation expense is used to better reflect the expense and value of a long-term asset as it relates to the revenue it generates., and taxes (to some extent). It can be used to showcase a firm’s financial performance without accounting for its capital structure.

EBITDA focuses on the operating decisions of a business because it looks at the business’ profitabilityNet IncomeNet Income is a key line item, not only in the income statement, but in all three core financial statements. While it is arrived at through the income statement, the net profit is also used in both the balance sheet and the cash flow statement. from its core operations before the impact of capital structure, leverage and non-cash items like depreciation are taken into account.

It is a non-GAAP metric in that it is not a recognized metric in use by IFRSIFRS StandardsIFRS standards are International Financial Reporting Standards (IFRS) that consist of a set of accounting rules that determine how transactions and other accounting events are required to be reported in financial statements. They are designed to maintain credibility and transparency in the financial world or US GAAP.