What is 'Earnings Before Interest, Tax and Depreciation - EBITD'

Earnings before interest, tax and depreciation (EBITD) is an indicator of a company's financial performance, which is calculated as:

Earnings Before Interest, Tax and Depreciation (EBITD)

This measure attempts to gauge a firm's profitability before any legally required payments, such as taxes and interest on debt, are paid. Depreciation is removed because this is an expense the firm records, but does not necessarily have to pay in cash.

BREAKING DOWN 'Earnings Before Interest, Tax and Depreciation - EBITD'

EBITD is very similar to earnings before interest, taxes, depreciation and amortization (EBITDA), but excludes amortization.

The difference between amortization and depreciation is subtle, but worth noting. Depreciation relates to the expensing of the original cost of a tangible assets over its useful life, while amortization is the expense of an intangible asset's cost over its useful life. Intangible assets include, but are not limited to, goodwill and patents, and are unlikely to represent a large expense for most firms.

Using either the EBITD or EBITDA measures should yield similar results.

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