What is EBIT and EBITDA?
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EBIT is Earnings Before Interest and Taxes. It’s a measure that is useful because it tries to correct for differences in profitability that arise by different income treatments of different financing (interest is an expense, dividends are not an expense.
EBITDA is Earnings Before Interest, Taxes, Depreciation, and Amortization. It’s a very quick and dirty estimate of operating cash flow, which is useful when one business is considering buying another business, or someone wants to use debt to finance purchasing the business and wants the operating cash flow to make the debt payments.
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