What is EBITDA?

Understanding EBITDA and Adjusted EBITDA

EBITDA, which stands for Earnings Before Interest, Taxes, Depreciation, and Amortization, is a key financial metric used to evaluate a company’s operating performance. By stripping out non-operational expenses like interest, taxes, depreciation, and amortization, EBITDA provides a clearer view of a company’s core profitability. It’s often used as a proxy for cash flow and allows investors and analysts to assess how efficiently a company generates earnings from its operations.

Why use EBITDA?

Because it isolates the earnings directly attributable to business operations, making it easier to compare companies within the same industry—regardless of how they finance assets or manage tax strategies.

How to Calculate EBITDA

The basic EBITDA formula:

EBITDA = Earning + Interest + Taxes + Depreciation + Amortization

This simple calculation gives a normalized view of profitability before non-operating and non-cash expenses.

What is Adjusted EBITDA?

Adjusted EBITDA takes it a step further. It modifies the standard EBITDA figure to account for non-recurring, irregular, or non-cash items that may distort a company’s true operating performance in a given period.

Common adjustments include:

• Stock-based compensation
• Restructuring or severance costs
• One-time legal or consulting fees

Adjusted EBITDA Formula

Adjusted EBITDA = EBITDA + other non-cash expenses + other one-time irregular charge

Why Finance Teams Value EBITDA

Why is EBITDA a better measure than net income? Simply put, EBITDA offers a clearer view of operational efficiency by removing factors that finance teams can’t control—like tax rates, interest costs, or accounting rules around depreciation.

Key Benefits of EBITDA:

• Focuses on core operations by excluding external variables.
• Removes the impact of investment decisions, such as taking on debt or purchasing long-term assets.
• Neutralizes timing differences in cash collections or vendor payments.
• Adjusted EBITDA further enhances clarity by excluding non-cash or irregular items.

This makes EBITDA, especially Adjusted EBITDA, a powerful tool for evaluating operating cash flow, planning, and decision-making.

How Planful Simplifies EBITDA Reporting

Using Planful’s FP&A platform makes calculating, reporting, and analyzing EBITDA effortless.

We create a statistical account within Planful to define EBITDA using actual system data.
For expenses that don’t map directly to standard GL accounts—such as restructuring charges, severance, rent, or benefits—we use memo accounts to input these manually. With this complete data set, Planful automatically generates both historical and forecasted EBITDA figures, ready for presentation in charts, dashboards, or board decks.

One Definition. Unlimited Insight.

What sets Planful apart is that once you’ve built the EBITDA definition, you can reuse it across:Income Statements

• Cash Flow reports
• Executive dashboards
• Scenario plans and forecasts

And because Planful is built for real-time updates, you always have access to the most current data with no manual updates required.

Get EBITDA Clarity with Planful

With Planful, understanding and reporting on EBITDA becomes streamlined, automated, and accurate. Whether you’re preparing for a board meeting or forecasting the next quarter, Planful helps finance teams gain a sharper view of operational performance and cash flow. And best of all, you can deliver reliable, up-to-date numbers to your CFO—fast.