EBITDA

EBITDA — earnings before interest, taxes, depreciation and amortisation — approximates the cash operating profit from core activities, stripping out financing costs and non-cash charges; widely used in valuation multiples and loan.

ByHoang TruongUpdated July 2, 2026

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A manufacturer reports operating profit of €3.5 million, depreciation of €2.0 million and amortisation of €0.5 million. Adding the non-cash charges back to operating profit gives EBITDA of €6.0 million, a proxy for the cash operating profit the business generates before financing costs and non-cash accounting charges are considered.

Where it fits

SubjectFinancial AccountingCoreTopicRevenue, Expenses & ProfitCoreTopicFinancial Statement Analysis & RatiosCore

The formula

LaTeX

\text{EBITDA} = \text{Operating profit} + \text{Depreciation} + \text{Amortisation}

Variables

$E B I T$: Operating profit (earnings before interest and tax) (€)
$D$: Depreciation charged in the period (€)
$A$: Amortisation charged in the period (€)

A proxy for cash operating profit from core activities; widely used in valuation multiples (e.g. EV / EBITDA) and loan covenants.

Check yourself

PracticeCORE

A company reports: revenue €10,000,000; cost of goods sold €6,000,000; selling and administrative expenses €1,200,000; depreciation €800,000; amortisation €200,000; interest expense €300,000; income tax €220,000. What is EBITDA?

Select an answer to check your understanding.