EBITDA
Earnings Before Interest, Taxes, Depreciation and Amortisation — the most cited profitability proxy in M&A.
Also known as: Earnings before interest, taxes, depreciation and amortisation
The one-line definition
EBITDA is operating profit before the effects of capital structure (interest), taxes, and non-cash allocations (depreciation and amortisation).
Why TS cares
In a sale process, buyers pay a multiple of EBITDA. That multiple is always applied to an adjusted, or "run-rate", figure — not the raw reported number. Normalising EBITDA is half the job of the Quality of Earnings.
The classic formula
EBITDA = Revenue − COGS − Operating expenses (excl. D&A)
= Operating profit + D&A
Common interview trap
Never quote EBITDA without saying which EBITDA: reported, run-rate, or pro-forma. TS seniors will always ask — answer before they do.