EBITDA strips out non-operating items to show core business performance. It's popular in mergers and among private-equity investors because it approximates cash flow generation.
Critics point out that ignoring depreciation understates capital intensity — capex is a real cost. Free cash flow tends to be a more honest measure.
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Open Decision Lab →Frequently asked questions
EBITDA vs operating income?
Operating income includes depreciation and amortisation; EBITDA excludes them.
Related terms
Free cash flow (FCF)
Cash a business generates after paying to run and grow itself.
Enterprise value
Market cap + debt − cash: the theoretical price to acquire the entire business.
Operating cash flow
Cash generated by a company's core business activities.
EPS (earnings per share)
A company's profit divided by the number of shares outstanding.