What is ebitda

EBITDA is an indicator of economic analysis that reflects the company's profit before taxes, depreciation expenses and interest payments on loans.

The economic meaning of EBITDA

When is EBITDA applied? Its primary purpose is to analyze the attractiveness of absorption transactions on borrowed funds. Today it is used for wider purposes.

Thus, EBITDA allows us to assess how profitable the core business of the company is, as well as its effectiveness, regardless of the size of credit debt and tax burden. Due to EBITDA, the depreciation method is not relevant in determining a company's profit.

The indicator is used to conduct a comparative analysis in relation to competitors, to assess the value of a business before selling. Based on it, investors evaluate the return on investment. The indicator is used in the analysis of the company's operating results, since it does not contain non-monetary items of expenses.

It is worth noting that many economic analysts criticize EBITDA. Since it does not include indicators of capital costs of the company (depreciation). It turns out that the company can spend huge amounts on new equipment, and EBITDA will remain unchanged. According to critics, the more realistic financial condition of the company reflect the indicators of "profit" and "operating flow of payments."