What does EBITDA stand for?

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a key measure of a company's operational profitability.

How do you calculate business valuation using EBITDA?

Business valuation is often estimated by multiplying the company's EBITDA by an industry-specific valuation multiple.

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EBITDA & Valuation Multiple Calculator

Calculate Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) and appraise business valuation.

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Net Income ($)

Interest Expense ($)

Taxes ($)

Depreciation ($)

Amortization ($)

Industry Valuation Multiple (x)

EBITDA & Business Valuation

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is widely considered one of the purest measures of a company's operational profitability and cash flow, stripped from the impacts of subjective accounting practices, capital structure, and regional tax environments.

The EBITDA Formula

EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization

Business Valuation = EBITDA × Industry Valuation Multiple

Why "Add Back" Expenses?

You add interest, taxes, depreciation, and amortization back to your net income because those metrics are not direct results of your core operating business model. Interest is a result of your financing choices (debt). Taxes are dictated by the government. Depreciation and amortization are non-cash accounting expenses for long-term assets. Removing them gives investors an unobstructed view of exactly how profitable your day-to-day operations are.