Glossary
EBITDA
Earnings before interest, tax, depreciation and amortisation: the standard starting point for comparing what a business generates from trading.
In plain English
EBITDA strips out interest, tax, depreciation and amortisation to show what the trading operation itself generates, before financing choices and accounting policies get involved. It exists so two businesses with different debt levels and asset ages can be compared on the same footing.
Its weakness is exactly what it excludes. A business can post strong EBITDA while its equipment ages toward a replacement bill that depreciation was quietly warning about. EBITDA is a starting point for analysis, never the finish line.
Why a lender cares
Credit teams start at EBITDA, then immediately adjust it: real owner wages back in, one-offs out, maintenance capex recognised. The number that comes out the other side, adjusted EBITDA, is what serviceability is actually tested on. A buyer negotiating on raw EBITDA is negotiating on the vendor's best case.
Where this term takes you
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