EBITDA
Earnings Before Interest, Taxes, Depreciation, and Amortization. A proxy for operating cash generation that strips out financing and accounting decisions.
Formula
EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization
How to Interpret
EBITDA lets you compare companies regardless of their capital structure, tax jurisdiction, or depreciation methods. But it's easily manipulated and ignores real cash costs like capex — which is why R40 prefers FCF.
Why It Matters
Popular in private equity and M&A for company comparisons. But Charlie Munger called it "bullshit earnings" because it pretends capital expenditures don't exist. Use it for quick comparisons, but verify with FCF.
R40 does not publish EBITDA per company. This entry explains the measure; the metrics R40 tracks and ranks are listed on the indicators index.