Understanding EBITDA and Growth Stocks with High EBITDA
What is EBITDA? Image created using Microsoft Designer What is EBITDA? EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is a financial metric that measures a company's profitability before accounting for non-operating expenses. It is calculated as follows: EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization For example, if a company has an annual net income of $500 million, interest expenses of $100 million, taxes of $150 million, and depreciation costs of $200 million, its EBITDA is calculated as: EBITDA = $500M + $100M + $150M + $200M = $950M Simply put, EBITDA reflects how much a company earns from its operations before non-operating costs . By excluding factors like depreciation and interest expenses, it provides a clearer picture of a company's actual cash generation capacity.