EBITDA is a measure of a company's operating profitability that strips out financing, tax, and non-cash charges. The acronym stands for earnings before interest, taxes, depreciation, and amortisation, the four items added back to reach the figure.
EBITDA is found by adding interest, taxes, depreciation, and amortisation back onto net income, or by adding depreciation and amortisation onto operating income. Investors, lenders, and buyers use it to compare companies that carry different capital structures, tax positions, and asset bases.
EBITDA sits above two related profit lines. Operating income deducts depreciation and amortisation but not interest or tax, so it lands below EBITDA; net income deducts all four, so it lands lower still. A company can post strong EBITDA while still facing heavy debt costs, large reinvestment needs, or weak free cash flow.