What is EBITDA?
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It measures operating performance by excluding non-cash charges and financing decisions.
What is a good EBITDA margin?
A good EBITDA margin varies by industry. Most healthy businesses target 10-25%, but benchmarks differ significantly across sectors.
Can EBITDA be negative?
Yes, EBITDA can be negative if operating expenses exceed revenue minus cost of goods sold. This indicates the company is not generating operating profit.
Is EBITDA the same as net income?
No. EBITDA excludes interest, taxes, depreciation, and amortization, while net income accounts for all expenses. EBITDA is typically higher than net income.
Why do investors use EBITDA for valuation?
Investors use EBITDA to compare company profitability across industries without interference from different capital structures, tax situations, or accounting choices.