How To Calculate EBITDA

How To Calculate EBITDA

Calculation of EBITDA or earnings before interest, tax, depreciation and amortisation, for the evaluation of a company's performance.

Hi, my name is Grant Hobson. I have been a finance analyst for the last six years. Today, I am going to run you through some financial performance methods as well as some investment appraisal techniques.

How to calculate earnings before interest, taxes, depreciation and amortisation or it is also known as "EBITDA". EBITDA is a way we evaluate a company's profitability which excludes items that make comparisons across company's difficulty and which is viewed as not central to company's core operations. It can be used as a proxy for the company's profitability and the general financial performance, and it can be calculated from the information found on the company's income statement.

To take an example, a company has generated a net income of forty thousand pounds in the year. To get the ebitda, we then need to add back in the interest, the tax, the depreciation and the amortisation. It can be seen on the income statement for the financial year.

The total of these four features is twenty one thousand seven hundred pounds. To get back to the ebitda, we simply have the net income and we add back in the interest, tax, depreciation and amortization which gives us the value of sixty one thousand seven hundred pounds. So to recap, the company has generated a net income of forty thousand pound in the year.

To get to the ebitda, we then need to add back in the interest , the tax , the depreciation and the amortisation. It can be seen on the income statement for the financial year. The total of these four features is twenty one thousand seven hundred pounds.

So to get back to the ebitda, we will simply have the net income and we add back in the interest, tax, depreciation and amortisation which gives us the value of sixty one thousand and seven hundred pounds.