what is ebita 
earnings before interest taxes and amortization ebita is a measure of company profitability used by investors it is helpful for comparing one company to another in the same line of business in some cases it can also provide a more accurate view of a business s value another similar measure adds depreciation to this list of factors this is earnings before interest taxes depreciation and amortization ebitda some analysts use ebita and ebitda as ways to gauge a company s value earning power and efficiency investopedia julie bangunderstanding ebitaebita is a metric taken from the financial data collected and reported by a company for a reporting period some analysts and investors consider a company s ebita to be a more accurate representation of its actual earnings this is because it removes the taxes owed the interest on company debt and the effects of amortization the accounting practice of writing off the cost of an intangible asset over a period of years from the equation it also is viewed by some as an indicator of the efficiency of a company s operations ebita vs ebitdaebita is not used as commonly as ebitda which adds depreciation to the calculation depreciation in company accounting is the recording of the reduced value of the company s tangible assets over time it s a way of accounting for the wear and tear on assets such as equipment and facilities some companies such as those in the utilities manufacturing and telecommunications industries require significant expenditures on equipment and infrastructure which are reflected in their books both ebita and ebitda are used by some analysts for gauging a company s operating profitability profitability is earnings generated throughout the ordinary course of doing business the company s profitability may be more apparent if capital expenditures and financing costs are subtracted from the official earnings total some analysts consider both ebita and ebitda to be reliable indicators of a company s cash flow however you should consider these metrics carefully because they tend to overstate a business s cash flow however some industries require significant investments in fixed assets therefore using ebitda to evaluate companies in asset heavy industries may provide a clearer view of operating profitability by excluding the impact of depreciation whereas ebita which includes depreciation or amortization might distort a company s profitability metrics in other words the ebita measurement may be used instead of ebitda for companies that do not have substantial capital expenditures that may skew the numbers ebita vs gaap earningsgenerally accepted accounting principles gaap earnings are as their name suggests a common set of standards accepted and used by companies and their accounting departments the use of gaap earnings standardizes the financial reporting of publicly traded companies in the united states many companies report gaap earnings as well as non gaap earnings which exclude one time transactions the rationale for reporting non gaap earnings is that substantial one off costs such as organizational restructuring can distort the true picture of a company s financial performance therefore some do not consider them normal operational costs earnings before interest and taxes ebit ebita and ebitda are examples of commonly used non gaap financial measures be careful with ebita and ebitda when making investment decisions because non gaap metrics are not standardized and can sometimes be misleading 1calculating ebitato calculate a company s ebita you must first determine the company s earnings before tax ebt this figure appears in the company s income statements and other investor relations materials and you add any interest and amortization costs so the formula is 