What does EBITDA stand for?

EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. This financial metric is significant in evaluating a company's operating performance by focusing on earnings generated from core operations, excluding the effects of capital structure and tax expenses.

The inclusion of depreciation and amortization in this definition is vital because it accounts for the non-cash expenses associated with tangible and intangible assets. By excluding these factors, EBITDA provides a clearer view of a company's operational profitability and cash flow. This clarity is particularly useful when comparing companies within the same industry, as it levels the playing field by removing differences in financing and accounting approaches.

This definition differentiates EBITDA from other financial metrics, as it specifically emphasizes earnings derived before the impacts of financing decisions and accounting practices related to asset valuation. The other options include inaccuracies in the terminology, which makes them incorrect in defining this commonly used metric.