Earnings Before Interest, Tax and Depreciation - EBITD

Earnings before interest, tax, and depreciation, i.e. EBITD, measures a company’s ability to operate and their financial “performance,” as investors say.

Why is it important to look at earnings before interest, taxes, and depreciation are accounted for? Investors aren’t interested in what kind of taxes a company is facing depending on their location. Similarly, interest, depreciation, and amoritization are more distractions than they are contributions to a company’s financial performance in the moment.

Investors want a raw look at the numbers: pure earnings, no strings attached. EBITD gives them a clearer picture of profitability than after interest, tax, and depreciation are taken into account.

Companies don’t legally have to post their EBITD, but it’s not hard for investors to put two and two together with the information on their income and cash flow statements, and do some basic addition. With this information, investors can feel more confident about comparing companies, and choosing which to invest in.