what is earnings before interest depreciation and amortization ebida 
earnings before interest depreciation and amortization ebida is a measure of the earnings of a company that adds the interest expense depreciation and amortization back to the net income number however it does include tax expenses this measure is not as well known or used as often as its counterpart earnings before interest taxes depreciation and amortization ebitda understanding earnings before interest depreciation and amortization ebida there are various ways to calculate ebida such as adding interest depreciation and amortization to net income another way to calculate ebida is to add depreciation and amortization to earnings before interest and taxes ebit and then subtract taxes the metric is generally used to analyze companies in the same industry it does not include the direct effects of financing where taxes a company pays are a direct result of its use of debt ebida can often be found as a metric for companies that do not pay taxes this can include many nonprofits such as non for profit hospitals or charity and religious organizations in this case it can be used interchangeably with ebitda all components needed to calculate ebida can be found on a company s income statement formula and calculation for ebidaebida is calculated by deducting certain costs from ebit or operating profit the formula for ebida is ebitda ebit depreciation amortization taxesas an example consider a company with the following financial information ebida is calculated by first finding ebit which is calculated as the difference between total net revenue and operating costs in this example we ll want to subtract the cost of goods sold s a expenses depreciation expense and amortization expenses from total revenue in this example ebit or operating profit is 575 000 however ebida does not want to consider the non cashflow items such as depreciation or amortization both are typically accounting entries that record an expense that does not tie to the cash outlay on the financial statements therefore both depreciation and amortization need to be added back in last ebida also considers interest because interest is not an operating expense it is not naturally included in operating profit therefore companies will want to include this expense in as it is often avoidable and on a fixed schedule in this example the final ebida is calculated as ebida 575 000 ebit 50 000 25 000 100 000 550 000special considerationsearnings before interest depreciation and amortization ebida is considered to be a more conservative valuation measure than ebitda because it includes the tax expense in the earnings measure the ebida measure removes the assumption that the money paid in taxes could be used to pay down debt an assumption made in ebitda this debt payment assumption is made because interest payments are tax deductible which in turn may lower the company s tax expense giving it more money to service its debt ebida however does not make the assumption that the tax expense can be lowered through the interest expense and therefore does not add it back to net income ebida is not regulated or required as part of gaap reporting therefore you probably won t see it explicitly calculated or reported as part of a company s financial statements criticism of ebidaebida as an earnings measure is very rarely calculated by companies and analysts it serves little purpose then if ebida is not a standard measure to track compare analyze and forecast instead ebitda is widely accepted as one of the major earnings metrics as well ebida can be deceptive as it ll still always be higher than net income and in most cases higher than ebit as well and like other popular metrics such as ebitda and ebit ebida isn t regulated by generally accepted accounting principles gaap thus what s included is at the company s discretion along with the criticism of ebit and ebitda the ebida figure does not include other key information such as working capital changes and capital expenditures capex 