Sales and profit

EBITDA

Earnings before interest, taxes, depreciation and amortization: operating income with the yearly wear-and-tear charges for equipment and other long-term assets added back.

Why does it matter?

It is widely used, especially in Brazil, to compare the operating results of companies with different debts and tax situations.

How do I read it?

EBITDA is not an official accounting figure, and it leaves out the money a company must spend to replace its equipment. StockLab shows operating income and free cash flow, which take those costs into account.

Example

$15 million of operating income plus $5 million of depreciation and amortization gives $20 million of EBITDA. If the company must spend $6 million a year to replace its machines, EBITDA leaves that cost out.