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Simple English definitions for legal terms
EBITDA
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A quick definition of EBITDA:
EBITDA: A fancy word that means how much money a company makes before they have to pay for things like loans, taxes, and things that wear out over time. It's different from how much money they actually have in their bank account because it doesn't show how easy it is for them to pay their bills.
A more thorough explanation:
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.