Formula
EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization
Calculation Example
If a company has a net income of $500,000, with $100,000 in interest, $50,000 in taxes, and $200,000 in depreciation and amortization, EBITDA is: 500,000 + 100,000 + 50,000 + 200,000 = $850,000
Data Source
Financial statements, accounting records
Tracking Frequency
Quarterly, Annually
Optimal Value
Higher is better, indicating strong operational profitability.
Minimum Acceptable Value
A positive EBITDA is needed to indicate operational health.
Benchmark
Varies by industry; often compared against competitors.
Recommended Chart Type
Bar chart (to compare across years), Line chart (for trend analysis)
How It Appears in Reports
Displayed in financial reports as a key metric for business valuation.
Why Is This KPI Important?
Helps assess profitability without financing and tax distortions.
Typical Problems and Limitations
Excludes capital expenditures and ignores cash flow constraints.
Actions for Poor Results
Improve revenue streams, control operational costs.
Related KPIs
Net Profit, Operating Profit Margin
Real-Life Examples
A telecom company increased EBITDA by 10% by reducing infrastructure costs.
Most Common Mistakes
Using EBITDA as cash flow proxy, ignoring necessary reinvestments.
