What is EBITDA?
A clear, quick view of operating profit—EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. Drop your numbers into our on-page EBITDA calculator to see where you stand.
How It Works
Why EBITDA MattersÂ
- Snapshots core earnings, stripping out financing choices and non-cash charges.Â
- Lenders use it to test covenant ratios.Â
- Buyers lean on it to set purchase multiples.Â
- Owners track it to judge everyday operating health.Â
EBITDA Equation—Step-by-Step
Start withÂ
|  Net Income Â
 |
+ Interest ExpenseÂ
 |
+ Income TaxesÂ
 |
+ DepreciationÂ
 |
+ AmortizationÂ
 |
= EBITDAÂ
 |
EBITDA vs. EBIT vs. Net Income
|  | EBITDA | EBIT | Net Income |
| Excludes Interest & Taxes | ✓ | ✓ | — |
| Excludes Depreciation & Amortization | ✓ | — | — |
| Shows after-tax bottom line | — | — | ✓ |
| Typical Use | Cash-flow proxy | Operating profit | Earnings for owners |
When analysts ask, “what does EBITDA tell me that EBIT can’t?”—the answer is cash-style comparability across asset-heavy and asset-light firms. Â
Industry Benchmarks (2025 Averages)*
How to Improve EBITDA
- Raise gross margin – Update pricing or switch to higher-yield products.Â
- Trim operating costs – Automate payroll, renegotiate leases.Â
- Reduce bad-debt write-offs – Tighten credit checks to lift revenue quality.Â
- Outsource non-core tasks – Lower overhead by using fractional CFO or bookkeeping services.Â
- Monitor monthly – Plug new figures into the EBITDA calculator to track gains.
Common Missteps
| Pitfall | Why It Skews Results | Fix |
| Counting one-time gains | Inflates metric | Strip out non-recurring items for Adjusted EBITDA. |
| Mixing GAAP & cash numbers | Double-counts expenses | Always pull figures from the same statement period. |
| Ignoring capital intensity | High EBITDA may still need heavy reinvestment | Compare alongside free cash flow and CapEx. |
