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Business wiki · Accounting and business finance

EBITDA

A profit measure before interest, taxes, depreciation and amortisation, whose adjustments must be clearly defined.

Search terms: Earnings before interest taxes depreciation and amortisation

A business example

A business reports ₹4 lakh of profit before tax after charging ₹50,000 interest and ₹1 lakh depreciation and amortisation.

Worked calculationFictional business scenario

  1. Starting point

    Profit before tax is ₹4 lakh.

  2. Add back

    Add ₹50,000 interest and ₹1 lakh depreciation and amortisation.

  3. Simplified EBITDA

    ₹4 lakh + ₹0.5 lakh + ₹1 lakh = ₹5.5 lakh.

What this shows

This arithmetic does not make EBITDA cash available to spend. Receivables, stock, capital expenditure and debt payments still affect cash.

What it is often confused with

EBITDA is not cash flow and may exclude material costs when described as adjusted EBITDA.

What to look at in your business

Ask for the calculation and reconcile each adjustment to the accounts.

Context and further reading

This entry explains the business term. The related guide below provides the next layer of context; any applicable legal test depends on the transaction and relevant period.

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Kosha.Services · Updated 2 October 2026

Related terms

Cash flow

The movement of money into and out of a business over a period.