Earnings Before Interest Taxes Depreciation and Amortization, EBITDA, is used as a measure of profitability that includes some business costs but not all. EBITDA measures company performance but excludes the following business costs: interest, taxes, depreciation, and amortization. These business expenses are considered financing or debt structure that could change based on an owner’s decision. That explains why EBITDA is often used to value a business for sale. The use of EBITDA as a measure of profitability is a matter of convention rather than fact. This means that even though EBITDA is USED as as measure of profitability, it is NOT a measure of profitability.
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