EBITDA

Is an economic term that stands for "Earnings before interests, taxes, depreciations and amoritzations".

A company that has a large profit via EBITDA can in many cases have high investments. This can lead to the company receiving significantly lower overall operating profit (EBIT).

If you as a fundamental investor want to see what the company actually has left after all expenses, interest and tax, you must look at annual profit or operating profit (net income). This is the profit that remains in the company after all expenses, and is included in the company's capital stock.

EBITDA is considered by many to be a very controversial figure. It shows far from the whole truth about a company's financial health. The purpose of this calculation is to be able to compare the profitability between different companies, this by removing the effect of the different balance sheet items that come before the result is shown.