Legal Definitions - EBITDA

Definition: EBITDA is an abbreviation used in accounting that stands for "Earnings before interest, taxes, depreciation, and amortization." It is a financial metric that measures a company's profitability by subtracting its expenses from its revenue, excluding certain expenses such as interest, taxes, depreciation, and amortization.

For example, if a company has a revenue of $1 million and expenses of $500,000, including $50,000 in interest, $100,000 in taxes, $150,000 in depreciation, and $50,000 in amortization, its EBITDA would be $450,000 ($1 million - $500,000).

EBITDA is often used by investors and analysts to evaluate a company's financial performance and compare it to other companies in the same industry. However, it is important to note that EBITDA does not reflect changes in liquidity, which is the ability of a company to meet its short-term obligations.