Glossary

With over 200 terms in both English and French, our M&A Dictionary is designed to help you better understand the key words and concepts related to the sale oe purchase of a business in Canada.

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Earnings Before Interest, Taxes, Depreciation, and Amortization

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Category: Business Valuation

Definition:

EBITDA is a measure of a company’s financial performance and is often used in addition to other metrics such as revenue, earnings and net income. The acronym EBITDA stands for earnings before interest, taxes, depreciation, and amortization and can be a useful metric to understand a business’s ability to generate cash flow for its owners.
EBITDA is a popular metric in business valuations as it focuses on the financial outcome of operating decisions and it does so by removing the impacts of non-operating decisions made by the existing management, such as interest expenses, tax rates, and significant intangible assets.
The value of EBITDA is thus considered to be a better reflection of the operating profitability of a business, and is often used by owners, buyers and investors to compare the value of different companies.