What is EBITDA and how is it calculated?
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EBITDA is a financial indicator (an acronym for Earnings Before Interest Taxes Depreciation and Amortization) that shows your company's profit before subtracting the interest you have to pay for the debt incurred, the taxes applicable to your business, the depreciation for impairment and amortization of the investments made. The purpose of EBITDA is to get a true picture of what the company is gaining or losing in the core business.
Although it is not part of a company's income statement, EBITDA is a ratio that allows you to know quickly and easily if your business is profitable or not, since it represents the gross operating profit calculated before deducting financial costs.
EBITDA is calculated on the basis of the company's final operating profit, excluding financial items (interest on debt), taxes, changes in the value of fixed assets (depreciation) and investment recovery.
Steps for calculating EBITDA:
These are some of the main uses of EBITDA:
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