What is EBITDA?

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) is a popular measure of a company's overall financial performance and is often used as an alternative to net income. It is seen as a proxy for a company's operating cash flow, as it strips out non-cash expenses like depreciation and amortization.

For Startups: For startups, particularly in high-growth or capital-intensive industries, EBITDA can be a more useful metric than net income, as it provides a clearer view of operational performance without being distorted by large, non-cash depreciation charges. It is frequently used in valuation, with companies being valued at a multiple of their EBITDA.

Calculation: EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization.

Example: A company with a net income of ₹20 Lakhs, interest of ₹5 Lakhs, taxes of ₹10 Lakhs, and depreciation of ₹15 Lakhs would have an EBITDA of ₹50 Lakhs.