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Finance Glossary

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EBITDA

Definition:

That is, Earnings Before Interest Taxes Depreciation and Amortization. This seems like a 5-eyeballed purple fish out of a Simpsons' nuclear plant river. Why on earth would anyone track this arcane piece of financial data?

Well, in theory EBITDA strips out noise, noise that isn't germane to the business being analyzed. The notion was popularized by high cap ex industries (like the cable industry) which generated very high unit margins but never had any capital available to give back to shareholders because the industry was busy buying content and itself (i.e. consolidating).

Many investors liken EBITDA to "cash flow" as a proxy for the unfettered operational cash earning power of the entity itself.

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