EBITDA means Earnings before interest taxes depreciation and amortizations. EBITDA focus on operating decisions of a business by excluding non-operating decisions.
Profitability between companies/industries can analysed by using EBITDA. A positive EBITDA means company is getting profits through its operations and a negative EBITDA means company is not getting profits through its operations and need to re adjust their operations to generate profits.
Advantages of EBITDA are as follows −
Disadvantages of EBITDA are as follows −
Here, Np=Net Profit, In=Interest, Ta=Taxes, D = Depreciation, A= Amortization
Here, OI = Operating Income, D = Depreciation, A= Amortization
Here, LP = Lease payments, IP= Interest payment, PP = Principal payments