EBITDA

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) measures a business's operating profitability independent of its financing and accounting decisions. Larger businesses are valued on EBITDA where SDE is used for owner-operated ones — the difference is that EBITDA does not add back an owner's salary, so it suits businesses with a management team in place. For example, $1M revenue with $700K operating costs (excluding interest, tax, depreciation, and amortization) is $300K EBITDA.