EBITDA

DefinitionEBITDA is earnings before interest, taxes, depreciation, and amortization. It measures a company’s operating profitability independent of how it is financed and how its assets are depreciated, which makes it the standard basis for valuing larger businesses where a management team, not the owner, runs day-to-day operations. Below roughly one million dollars in earnings, buyers usually work from SDE instead, because the owner’s own labor is a material part of the return.