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's Drawback

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.

RELATED TERMS
  1. EBITDA - Earnings Before Interest, ...

    EBITDA stands for earnings before interest, taxes, depreciation ...
  2. Adjusted EBITDA

    Adjusted EBITDA is a measure computed for a company that looks ...
  3. Earnings Before Interest, Tax, ...

    Earnings Before Interest, Tax, Amortization And Exceptional Items ...
  4. Depreciable Property

    Depreciable property is any type of asset that is eligible for ...
  5. Depreciation

    Depreciation is an accounting method of allocating the cost of ...
  6. Operating Income Before Depreciation ...

    Operating Income Before Depreciation And Amortization is a measure ...
Related Articles
  1. Investing

    EBITDA: A clear look

    EBITDA can be used to analyze and compare profitability between companies and industries, investors should understand that there are serious limits to it.
  2. Investing

    An Introduction To Depreciation

    Companies make choices and assumptions in calculating depreciation, and you need to know how these affect the bottom line.
  3. Taxes

    Recoverable Depreciation: How it Works

    Recoverable depreciation is a concept used in many insurance policies and claims.
  4. Investing

    Premium Bonds: Problems And Opportunities

    Learn all about premium bonds and how you can make them work for you.
  5. Investing

    10 Common Finance Terms Every Newbie Needs To Know

    In order to get a better understanding of what you read in markets news, we’ll briefly explore the terms you commonly encounter.
  6. Small Business

    Writing Off the Expenses of Starting Your Own Business

    Learn how to navigate the complicated rules for writing off the expenses of starting your own business. It could save you a lot of money.
  7. Managing Wealth

    Cars That Depreciate In Value The Most

    You can't avoid depreciation on your car, but you can avoid certain models that depreciate in value a lot.
  8. Insights

    How Fortune 500 Companies Avoid Paying Income Tax

    President Donald Trump is not alone in not paying taxes.
RELATED FAQS
  1. What is the formula for calculating EBITDA?

    EBITDA measures the profitability of a company by stripping out various items from the income statement, but the two formulas ... Read Answer >>
  2. What's the difference between amortization and depreciation?

    Learn the difference between amortization, depreciation, and depletion and how companies use these accounting methods to ... Read Answer >>
  3. How are gross profit and EBITDA different?

    Gross profit and EBITDA show the profitability of a company in different ways. Investors should know what goes into each ... Read Answer >>
  4. Why is the EBITDA margin considered to be a good indicator of a company's financial ...

    Understand why the EBITDA margin is a good indicator of a company's financial health. Learn why it also has some drawbacks ... Read Answer >>
  5. What is the difference between EBIT and EBITDA?

    EBIT and EBITDA are two metrics that measure profitability whereby they share similarities, but the differences in their ... Read Answer >>
  6. What is the difference between cash flow and EBIDTA?

    Understand the difference between cash flow and EBITDA, and find out why cash flow is a more comprehensive metric for evaluating ... Read Answer >>
Trading Center