BUSINESS SPEAK · EBITDA
EBITDA: Earnings before interest, taxes, depreciation and amortisation
Operating profit before financing, tax and non-cash costs.
What it means
EBITDA starts from net profit and adds back interest, tax, depreciation and amortisation. It shows what the operations earn regardless of how the business is financed or taxed.
Where you’ll meet it
- Buyers of larger or manager-run businesses often value them at a multiple of EBITDA, commonly 4–10× or more.
- It is not cash: it ignores equipment spending and money tied up in stock.
Worked example
Scenario: Net profit 80,000; interest 10,000; tax 20,000; depreciation 15,000.
- EBITDA = 80,000 + 10,000 + 20,000 + 15,000
- = 125,000
- At 5×: 125,000 × 5 = 625,000
Answer: EBITDA is 125,000; at a 5× multiple the business is worth about 625,000.