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Leveraged Buyouts: A Practical Introductory Guide to LBOs by David Pilger

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Chapter 10: Ebitda

Earnings Before Interest, Taxes, and Depreciation and Amortization is a mouthful. The finance community has naturally enough, therefore, grown accustomed to using the acronym EBITDA. To calculate EBITDA you start with net income and simply add back any interest, taxes, and depreciation and amortization expenses.

It’s worth noting that EBITDA will not appear in any accountant review of a company. This is because EBITDA is not an accounting metric. Rather, it is a means of measuring a company’s profitability. What is, perhaps, most significant about EBITDA is that it enables the comparison of profitability between companies regardless of capital structure and accounting treatment.

We can calculate EBITDA by first turning ...

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