Asked in Math and ArithmeticBusiness Accounting and BookkeepingCommercial Bank and Checking AccountsIsaac Newton
How do you calculate EBIDTA?
May 12, 2007 3:18PM
EBITDA «ee-bit-dah» is an acronym for Earnings Before Interest, Taxes, Depreciation, and Amortization. The same calculation can be arrived at from "operating income before depreciation and amortization" (OIBDA). It is one measure of 'operating cash flow'. It differs from the cash flow from operations found in the Statement of Cash Flow primarily by ignoring payments for taxes or interest. EBITDA does not add back many of the other non-cash operating expenses, like the Statement of Cash Flow does. EBITDA also differs from free cash flow because of the difference above, and also because it does not recognize the cash requirements for replacing capital assets. Although there are different points of view regarding the use of this metric by equity owners, most agree to its validity when used by debtholders, or to evaluate a business's ability to handle debt.