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 flow from the entire company’s operations.
The metric is a variation of the operating income (EBIT) 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 depreciation, 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’ profitability 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 IFRS or US GAAP.