EBITDA

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EBITDA means Earnings Before Interest, Taxes, Depreciation, and Amortization. It is a very quick estimation of a company's operating cash flow.

Many lenders require their customers to report EBITDA to them on a quarterly basis as its own number, or as part of a ratio. These "covenants" are used by the lenders as indicators of the solidity of their loans.

EBITDA is often used as a starting point in determining the price of a business. For example, a privately held business might be sold for a ratio of 5 to 7 times normalized EBITDA.

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