Equity · Core
EBITDA
EBITDA is earnings before interest, tax, depreciation, and amortization — a crude operating-profit proxy used in leverage and EV multiples.
Definition
Start from operating income and add D&A (or from net income and add interest, tax, D&A). It ignores capex, working capital, stock comp, and the fact that depreciation is often a real wearing-out of assets.
Why it matters
Credit and PE live on Debt/EBITDA and EV/EBITDA. The metric is comparable across capital structures — and easy to abuse with add-backs.
Case
A tower company with huge D&A and recurring capex can look cheap on EV/EBITDA and expensive on FCF. Lenders who only saw EBITDA learned that in 2008 and 2020.
How to read it
Haircut add-backs. Reconcile to unlevered free cash flow. If capex ≈ D&A forever, EBITDA is not cash.
No query has been run yet. Which is tragically normal for most knowledge systems, but we are trying to evolve past decorative databases.