The expression EBITDA is a financial and accounting acronym that stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a company’s financial health.
EBIDTA is used to measure the productivity of a business by calculating how much it makes — its earnings — without taking into consideration expenses that, while real, are not part of the production process. These can include interest on loans, income taxes and depreciation, and amortization of capital goods. As such, EBIDTA effectively measures cash flow from operations and is used by accountants and financial analysts as part of their analysis of a company’s overall financial health.