EBITDA
Definition
EBITDA stands for earnings before interest, taxes, depreciation, and amortization. It approximates the cash operating profit of a business before financing and accounting choices, which is why deal professionals use it as the standard yardstick for valuing and comparing companies.
In practice
Almost every deal is priced as a multiple of EBITDA, and almost every debt package is sized against it. Its weakness is what it ignores: capital expenditure, working capital, and anything management labels an "adjustment." Reading the adjustments is half the job in diligence.