EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortisation. It is a widely used operational profitability measure that allows comparing companies without the potentially distorting effects and possible manipulations of financing and accounting decisions.
To measure EBITDA you simply take the sales revenue and subtract all expenses other than interest, taxes, depreciation, and amortization.
EBITDA = Revenue – Expenses (excluding interest, tax, depreciation and amortisation)
This indicator is included in the book: Key Performance Indicators – the 75+ measures every manager needs to know, which contains an in-depth description of this KPI, as well as practical advice on data collection, calculations, target setting, and actual usage.