Short Definition:
EBITDA is a company's profit calculated before subtracting interest, tax, depreciation and amortisation, used to show how much cash the core business generates before financing and accounting decisions are factored in.
Full Explanation:
Because it strips out financing costs (interest), government levies (tax), and non-cash accounting charges (depreciation on physical assets, amortisation on intangible ones), EBITDA is widely used to compare operating performance between companies with different debt loads, tax jurisdictions or capital structures. It isn't a statutory or GAAP-recognised measure in the UK, so companies calculate it differently, and it deliberately ignores real costs like debt repayment and capital investment — a business can show healthy EBITDA while still burning cash. Investors and lenders often use it as a starting point for valuation multiples, but rarely as the whole picture.
In Practice:
A UK SMB founder raising a funding round should expect investors to ask for EBITDA alongside revenue, and should be ready to explain any add-backs (one-off costs excluded from the figure) — inflated or inconsistent EBITDA adjustments are one of the fastest ways to lose credibility in due diligence.
Acronym:
EBITDA
Related Terms:
Source Link:
https://vogueboost.com/ (No single authoritative primary source — EBITDA is a market-standard, non-statutory metric with no FCA, HMT or PSR-issued definition)
Last Reviewed:
20260725
