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EBITDA |
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Definition of EBITDAEBITDAEarnings before interest, taxes, depreciation, and amortization.
Related Terms:Earnings before interest, taxes, depreciation and amortization (EBITDA)The operating profit before deducting interest, tax, depreciation and amortization. Adjusted EBITDAConventional earnings before interest, taxes, depreciation, and amortization (ebitda) revised to exclude the effects of mainly nonrecurring items of revenue or gain and expense or loss. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)An earningsbased measure that, for many, serves as a surrogate for cash flow. Actually consists of working Defined EBITDAA measure of ebitda that is outlined or defined in a debt or credit agreement. EBITDA Marginebitda divided by total sales or total revenue. EBITDAREarnings before interest, taxes, deprecation, amortization, and rents. Recurring EBITDAThe standard ebitda with the effects of nonrecurring items removed. fractional interest discountthe combined discounts for lack of control and marketability. g the constant growth rate in cash flows or net income used in the ADF, Gordon model, or present value factor. Accelerated depreciationAny depreciation method that produces larger deductions for depreciation in the Accounting earningsearnings of a firm as reported on its income statement. Accrued interestThe accumulated coupon interest earned but not yet paid to the seller of a bond by the Adjusted present value (APV)The net present value analysis of an asset if financed solely by equity AmortizationThe repayment of a loan by installments. Amortization factorThe pool factor implied by the scheduled amortization assuming no prepayemts. Amortizing interest rate swapSwap in which the principal or national amount rises (falls) as interest rates Asymmetric taxesA situation wherein participants in a transaction have different net tax rates. Base interest rateRelated: Benchmark interest rate. Before-tax profit marginThe ratio of net income before taxes to net sales. Benchmark interest rateAlso called the base interest rate, it is the minimum interest rate investors will Best-interests-of-creditors testThe requirement that a claim holder voting against a plan of reorganization Capitalized interestinterest that is not immediately expensed, but rather is considered as an asset and is then Cash flow after interest and taxesNet income plus depreciation. Compound interestinterest paid on previously earned interest as well as on the principal. Covered interest arbitrageA portfolio manager invests dollars in an instrument denominated in a foreign Deferred taxesA non-cash expense that provides a source of free cash flow. Amount allocated during the DepreciationA non-cash expense that provides a source of free cash flow. Amount allocated during the Depreciation tax shieldThe value of the tax write-off on depreciation of plant and equipment. Double-declining-balance depreciationMethod of accelerated depreciation. EarningsNet income for the company during the period. Earnings before interest and taxes (EBIT)A financial measure defined as revenues less cost of goods sold Earnings per share (EPS)EPS, as it is called, is a company's profit divided by its number of outstanding Earnings retention ratioPlowback rate. Earnings surprisesPositive or negative differences from the consensus forecast of earnings by institutions Earnings yieldThe ratio of earnings per share after allowing for tax and interest payments on fixed interest Economic earningsThe real flow of cash that a firm could pay out forever in the absence of any change in Effective annual interest rateAn annual measure of the time value of money that fully reflects the effects of Equilibrium rate of interestThe interest rate that clears the market. Also called the market-clearing interest Forward interest rateinterest rate fixed today on a loan to be made at some future date. Fully diluted earnings per sharesearnings per share expressed as if all outstanding convertible securities Gross interestinterest earned before taxes are deducted. InterestThe price paid for borrowing money. It is expressed as a percentage rate over a period of time and Interest coverage ratioThe ratio of the earnings before interest and taxes to the annual interest expense. This Interest coverage testA debt limitation that prohibits the issuance of additional long-term debt if the issuer's Interest equalization taxTax on foreign investment by residents of the U.S. which was abolished in 1974. Interest paymentsContractual debt payments based on the coupon rate of interest and the principal amount. Interest on interestinterest earned on reinvestment of each interest payment on money invested. Interest-only strip (IO)A security based solely on the interest payments form a pool of mortgages, Treasury Interest rate agreementAn agreement whereby one party, for an upfront premium, agrees to compensate the Interest rate capAlso called an interest rate ceiling, an interest rate agreement in which payments are made Interest rate ceilingRelated: interest rate cap. Interest rate floorAn interest rate agreement in which payments are made when the reference rate falls Interest rate on debtThe firm's cost of debt capital. Interest rate parity theoreminterest rate differential between two countries is equal to the difference Interest rate riskThe risk that a security's value changes due to a change in interest rates. For example, a Interest rate swapA binding agreement between counterparties to exchange periodic interest payments on Interest subsidyA firm's deduction of the interest payments on its debt from its earnings before it calculates Interest tax shieldThe reduction in income taxes that results from the tax-deductibility of interest payments. Loan amortization scheduleThe schedule for repaying the interest and principal on a loan. Low price-earnings ratio effectThe tendency of portfolios of stocks with a low price-earnings ratio to Negative amortizationA loan repayment schedule in which the outstanding principal balance of the loan Net adjusted present valueThe adjusted present value minus the initial cost of an investment. Nominal interest rateThe interest rate unadjusted for inflation. Open interestThe total number of derivative contracts traded that not yet been liquidated either by an Option-adjusted spread (OAS)1) The spread over an issuer's spot rate curve, developed as a measure of Planned amortization class CMO1) One class of CMO that carries the most stable cash flows and the Pooling of interestsAn accounting method for reporting acquisitions accomplished through the use of equity. Price/earnings ratio (PE ratio)Shows the "multiple" of earnings at which a stock sells. Determined by dividing current Rate of interestThe rate, as a proportion of the principal, at which interest is computed. Real interest rateThe rate of interest excluding the effect of inflation; that is, the rate that is earned in terms Retained earningsAccounting earnings that are retained by the firm for reinvestment in its operations; Risk-adjusted profitabilityA probability used to determine a "sure" expected value (sometimes called a Risk-adjustedreturn Return earned on an asset normalized for the amount of risk associated with that asset. Short interestThis is the total number of shares of a security that investors have borrowed, then sold in the Simple interestinterest calculated only on the initial investment. Related:compound interest. Spot interest rateinterest rate fixed today on a loan that is made today. Related: forward interest rates. Stated annual interest rateThe interest rate expressed as a per annum percentage, by which interest Straight line depreciationAn equal dollar amount of depreciation in each accounting period. Sum-of-the-years'-digits depreciationMethod of accelerated depreciation. Times-interest-earned ratioearnings before interest and tax, divided by interest payments. True interest costFor a security such as commercial paper that is sold on a discount basis, the coupon rate DepreciationA technique by which a company recovers the high cost of its plant-and-equipment assets gradually during the number of years they’ll be used in the business. depreciation can be physical, technological, or both. Earnings per share of common stockHow much profit a company made on each share of common stock this year. RETAINED EARNINGSProfits a company plowed back into the business over the years. Last January’s retained earnings, plus the net income or profit that a company made this year (which is calculated on the income statement), minus dividends paid out, equals the retained earnings balance on the balance sheet date. STRAIGHT-LINE DEPRECIATIONA depreciation method that depreciates an asset the same amount for each year of its estimated AmortizationSee depreciation, but usually in relation to assets attached to leased property. DepreciationAn expense that spreads the cost of an asset over its useful life. Earnings before interest and taxes (EBIT)The operating profit before deducting interest and tax. InterestThe cost of money, received on investments or paid on borrowings. Profit before interest and taxes (PBIT)See EBIT. Accumulated depreciationA contra-fixed asset account representing the portion of the cost of a fixed asset that has been previously charged to expense. Each fixed asset account will have its own associated accumulated depreciation account. Depreciation expenseAn expense account that represents the portion of the cost of an asset that is being charged to expense during the current period. Interest incomeIncome that a company receives in the form of interest, usually as the result of keeping money in interest-bearing accounts at financial institutions and the lending of money to other companies. Interest payableThe amount of interest that is owed but has not been paid at the end of a period. Payroll taxes payableThe amount of payroll taxes owed to the various governments at the end of a period. Retained earningsThe residual earnings of the company. Statement Retained EarningsOne of the basic financial statements; it takes the beginning balance of retained earnings and adds net income, then subtracts dividends. The Statement of Retained earnings is prepared for a specified period of time. accelerated depreciation(1) The estimated useful life of the fixed asset being depreciated is accumulated depreciationA contra, or offset, account that is coupled amortizationThis term has two quite different meanings. First, it may basic earnings per share (EPS)This important ratio equals the net depreciationRefers to the generally accepted accounting principle of allocating diluted earnings per share (EPS)This measure of earnings per share earnings before interest and income tax (EBIT)A measure of profit that earnings per share (EPS)See basic earnings per share and diluted earnings per share. net income (also called the bottom line, earnings, net earnings, and netoperating earnings) price/earnings ratio (price to earnings ratio, P/E ratio, PE ratio)This key ratio equals the current market price
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