Key performance question this indicator helps to answer
To what extent are we operating our business efficiently to generate profits?
Why is this indicator important?
Another financial performance indicator is EBITDA, or Earnings Before Interest, Taxes, Depreciation and Amortisation. It is essentially taking sales revenue and subtracting all expenses other than interest, taxes, depreciation and amortisation.
EBITDA is therefore a measure of a company’s operational profitability over time, but taking out the potentially distorting effects of changes in interest, taxes, depreciation and amortisation, which can all be manipulated by financing and accounting decisions. The argument for using ...