Evaluating a business with EBITDA

Definition: EBITDA

EBITDA stands for "EarningsBeforeInterest, Taxes, Depreciation and Amortization". It represents the cash flow generated by the company's activity after deduction of its operating expenses.

When should EBITDA be used?

There are three situations in which the EBITDA criterion can be used to evaluate a company. When applying for financing to set up a business, EBITDA is studied by the banker to assess the company's repayment capacity. Then, when the company's annual balance sheet is drawn up, its calculation enables the evolution of its overall profitability to be determined. It can also highlight certain negative points that the company can then work on. Whentaking over a company, this is an element that needs to be studied carefully, as it is a good indicator for the buyer of the financing capacity of his takeover project.

If you'd like to have your business assessed using EBE, please don't hesitate to contact one of our experts: contact a XVAL consultant.