EBITDA

Last week’s post on valuation http://www.avc.com/a_vc/2011/09/determining-valuation-multiples.html brought a couple questions about EBITDA. The first of which is how do you pronounce that acronym? The answer to that question is e-bit-dah. The second of which is what does it mean? The answer to that is Earnings Before Interest Taxes Depreciation and Amortization.

The way I like to think about EBITDA is the pre-tax cash earning power of the business. It is not much different than the notion of Operating Income which is revenue minus cost of goods sold and operating expenses. But it takes out the two big non-cash items in an income statement, depreciation and amortization.

Fred Wilson

Full Story: http://www.avc.com/a_vc/2011/09/ebitda.html