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A company's earnings before interest, taxes, depreciation, and amortization (commonly abbreviated EBITDA, [1] pronounced / ˈ iː b ɪ t d ɑː,-b ə-, ˈ ɛ-/ [2]) is a measure of a company's profitability of the operating business only, thus before any effects of indebtedness, state-mandated payments, and costs required to maintain its asset base.
A professional investor contemplating a change to the capital structure of a firm (e.g., through a leveraged buyout) first evaluates a firm's fundamental earnings potential (reflected by earnings before interest, taxes, depreciation and amortization and EBIT), and then determines the optimal use of debt versus equity (equity value).
Unlevered free cash flow (i.e., cash flows before interest payments) is defined as EBITDA − CAPEX − changes in net working capital − taxes. This is the generally accepted definition. If there are mandatory repayments of debt, then some analysts utilize levered free cash flow, which is the same formula above, but less interest and ...
For a business, gross income (also gross profit, sales profit, or credit sales) is the difference between revenue and the cost of making a product or providing a service, before deducting overheads, payroll, taxation, and interest payments. This is different from operating profit (earnings before interest and taxes). [1]
This is an accepted version of this page This is the latest accepted revision, reviewed on 18 December 2024. This article is about the financial term. For other uses, see Interest (disambiguation). Sum paid for the use of money A bank sign in Malawi listing the interest rates for deposit accounts at the institution and the base rate for lending money to its customers In finance and economics ...
In accounting, the revenue recognition principle states that revenues are earned and recognized when they are realized or realizable, no matter when cash is received. It is a cornerstone of accrual accounting together with the matching principle. Together, they determine the accounting period in which revenues and expenses are recognized. [1]
Partnership earned profits, and a share of profits was allocated to the partner. The increase in the capital will record in credit side of the capital account. Salary and interest allowances are guaranteed payments, discussed later. Capital account of a partner is decreased when the owner makes withdrawals of cash or property
Factor income (also called Primary income or Earned Income) is the flow of income that is derived from the factors of production, i.e., the general inputs required to produce goods and services. Factor income on the use of land is called rent , income generated from labor is called wages , and income generated from capital is divided between ...