EBITA / EBITDA - Earnings before interest, taxes, (depreciation), and amortization

EBIT / EBITA / EBITDA are some of the most used indicators to measure the operational profitability of a company. These measures are used by investors to evaluate and compare the profitability of companies, but do not take into consideration the cost of capital.

EBITDA, or earnings before interest, taxes, depreciation, and amortization, is an alternate measure of profitability to net income. By stripping out the non-cash depreciation and amortization expense as well as taxes and debt costs dependent on the capital structure, EBITDA attempts to represent cash profit generated by the company’s operations.

EBITDA can be used to track and compare the underlying profitability of companies regardless of their depreciation assumptions or financing choices.

EBITA is not as commonly used as EBITDA. The extra factor, depreciation, represents the recording of how a company's tangible assets decrease their value over time. It is a way of accounting for the wear and tear on assets such as equipment and facilities.

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