What is EBITA?
submitted by Grace

RonJohn

Earnings Before Interest Tax and Amortization. It's a quick way to look at profitability.

EBITA Margin = Profit Before Taxation + Net Interest / Amortization.

chellium

EBITA can help analysts and investors see a company's performance, without the noise of interest expenses, taxes, or amortization. That's useful because interest and taxes can vary so much, it's makes it hard to get an apples to apples comparison from one company to the next. EBITA helps focus on how well the business itself is doing, purely from its main operations.

Also, amortization includes intangible assets like patents and trademarks, which can sometimes distort the profit numbers. Just one more reason it's handy to exclude.

spendy

Building on that, yes EBITA can be useful, but it’s not perfect. It ignores capital expenditures and changes in working capital. Both of those are pretty critical if you want to understand cash flow. Also, some companies might have substantial amortization expenses if they've invested in intangible asset investments, which could make their EBITA look better than their actual ability to make money. EBIT might be a more useful metric in that case.