Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)

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Definition of 'Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)'

This is also sometimes called operational cash flow. In large companies, the figures deducted in the accounts for depreciation and amortization reduce the value of assets or amortize intangible assets and do not affect the cash flow.

As such, this figure is of particular interest to creditors who want to know how much money a company has free to repay its debts and interest on those debts. The EBITDA can also be used to compare companies in and across different sectors and industries.

This figure is calculated by looking at earnings before the deduction of interest expenses, taxes, depreciation, and amortization.

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