What is Earnings Before Interest, Depreciation and Amortization - EBIDA
Earnings Before Interest, Depreciation and Amortization (EBIDA) is a measure of the earnings of a company that adds the interest expense, depreciation and amortization back to the net income number, but takes the tax expense into consideration. This measure is not as well known or used as often as its counterpart, earnings before interest, taxes, depreciation and amortization (EBITDA).
EBIDA = Net Income + Interest Expense + Depreciation + Amortization
BREAKING DOWN Earnings Before Interest, Depreciation and Amortization - EBIDA
Earnings Before Interest, Depreciation and Amortization (EBIDA) is considered to be a more conservative valuation measure than EBITDA because it includes the tax expense in the earnings measure. The EBIDA measure removes the assumption that the money paid in taxes could be used to pay down debt, an assumption made in EBITDA. This debt payment assumption is made because interest payments are tax deductible, which, in turn, may lower the company's tax expense, giving it more money to service its debt. EBIDA, however, does not make the assumption that the tax expense can be lowered through the interest expense and, therefore, does not add it back to net income.
EBIDA as an earnings measure is very rarely calculated by companies and analysts. It serves little purpose, then, if EBIDA is not a standard measure to track, compare, analyze and forecast. Instead, EBITDA is widely accepted as one of the major earnings metrics.