EBITDA is an acronym that stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a company's profitability that is calculated by adding back interest, taxes, depreciation, and amortization expenses to its net income.
For example, let's say a company has net income of $100,000, interest expense of $10,000, tax expense of $20,000, depreciation expense of $5,000, and amortization expense of $1,000. The company's EBITDA would be $100,000 + $10,000 + $20,000 + $5,000 + $1,000 = $136,000.
EBITDA is often used as an alternative to net income because it provides a more comprehensive view of a company's underlying performance, since it excludes items that can vary greatly from one company to another, such as interest expense and tax rates.
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