What is EBITDA?
Earnings Before Interest, Taxes, Depreciation, and Amortization — a measure of core operating profit.
EBITDA strips out financing and accounting decisions (interest, taxes, depreciation, amortization) to show how much cash a company's actual operations generate. It's a favorite of investors comparing companies with different debt loads or tax situations.
It's useful — but treat it with suspicion. Because it ignores real costs like interest and equipment wear, companies love to quote EBITDA when their actual net income looks bad. Charlie Munger reportedly called it 'bullshit earnings.'
Rule of thumb: EBITDA tells you if the engine runs; net income tells you if you're actually making money.
Related terms
Definitions from the Business Dog Glossary — educational, occasionally satirical, never financial advice.