The EBITDA (Earnings Before Interest, Taxes, Depreciations and Amortizations) is easily identifiable on the income statement, since it corresponds to the profit before depreciation, financing costs and taxes. It may be inferred as a reference of the operating activity of the company. Lets see how to calculate the EBITDA:
+ Net Revenues
+ Operational grants
– Raw materials and consumables
– Operating expenses
– Employees’ benefits
+ Other gains
– Other costs
The EBITDA is usually regarded as indicator, and as in any other indicator you should pay attention to both the result and to how it is composed: while calculating it you may include items from the income statement that are not directly related to the main activity of the company, such as gains and losses charged to subsidiaries or fair value increases (or decreases). If that is happening, you should decide if there is a need to adjust the EBITDA.
While comparing two companies within the same industry, you should also understand if both companies have similar investing and financing profiles.