What is the Full Form of EBITDA in the Share Market?

The EBITDA in Full Form in the Share Market is Earnings Before Interest, Taxes, Depreciation, and Amortization. It is an exceptional method of ensuring profitability in the net income and avoids amortization expenses, non-cash depreciation, taxes, and debt costs that depend on the debt structure.

How is EBITDA calculated?

EBITDA is calculated after subtracting the company’s interest other than taxes, interests, depreciation, and amortization from the net income. It is calculated as a cumulative average of net profits, interests, taxes, amortization, and depreciation. If the investor wants to check how the financial standing of the company is affected by debt, they can eliminate taxes and depreciation from the calculation.

Advantages of calculating EBITDA:

EBITDA offers a reliable overview of the growth of the business and the effectiveness of its operational model. It shows the actual value of the cash flow of the company that is generated through its active operations. It accounts only for expenses that are required to keep the day-to-day operations of the firm running. EBITDA indicates the appeal of the company as a candidate for leveraged buyouts. It also compares the financial efficiency of the firm against its rivals.