EBITDA

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a measure of a company's overall financial performance and is used as an alternative to net income in some circumstances.

EBITDA strips out financing decisions and accounting choices to show you how much cash a business generates from core operations — the preferred profitability metric for comparing companies across different capital structures.

What this tells you

Earnings before interest, taxes, depreciation and amortization. An attempt to show what the operating business earns before financing decisions and accounting choices are layered on top — useful for comparing two companies with different debt loads or asset ages.

What it does not tell you

It is not a GAAP measure and there is no single official definition, so two companies can compute it differently and both be correct. More importantly, the things it excludes are real. Interest is money that actually leaves the building. Depreciation stands in for equipment that genuinely wears out and will genuinely have to be replaced. The standing criticism is worth keeping in mind: a measure of earnings before the expensive parts is not a measure of earnings.

Further reading: Wikipedia