EBITDA

Earnings Before Interest, Taxes, Depreciation and Amortization. EBITDA is considered a way of determining if a business is operationally profitable, i.e., does its operations cost more than it earns from them – does in fact have a positive margin on its activities or a negative margin. The exclusion of depreciation is debatable – while many tax systems allow accelerated depreciation to encourage investment in capital goods and plant (i.e., plant with a useful life of say 10 years being depreciated over 3), wear and tear and the ultimate need to replace depreciated capital assets has to be seen as a real cost of doing business and should be taken account of.

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