EBITDA strips out capital structure (interest), tax jurisdiction, and accounting policy choices (depreciation/amortisation) to show the raw operating earning power of a business.

EBITDA is the most common denominator in EV/EBITDA — the most widely used valuation multiple in equity research globally.

EBITDA vs EBIT vs PAT

  • EBITDA — adds back D&A and interest from operating profit
  • EBIT — adds back D&A only (Operating Profit)
  • PAT — final profit after all expenses, interest, and taxes