GlossaryAccountingAdvisory
EBITDA
Earnings Before Interest, Taxes, Depreciation and Amortisation
Definition
A measure of operating performance: profit before interest, tax, depreciation and amortisation are taken off.
In plain language
EBITDA sets aside how a business is financed (interest), taxed, and the accounting cost of its assets wearing out (depreciation and amortisation), to show what its operations earn on their own terms.
That makes it useful for comparing operating performance over time or between businesses. It is not the same as cash flow: it ignores the cash spent on assets, on working capital and on tax.
Example
A business with a net profit of ₹20 lakh that paid ₹5 lakh in interest, ₹7 lakh in tax and recorded ₹8 lakh of depreciation has an EBITDA of ₹40 lakh.