Understanding EBITDA - Definition, Formula & Calculation

EBITDA is one of the most commonly used financial metrics in business but also one of the most misunderstood.

Standing for Earnings Before Interest, Taxes, Depreciation, and Amortization, EBITDA is often seen as a proxy for a company's ability to generate profits from operations, free from the effects of financing and accounting decisions.

This session will provide a step-by-step walkthrough of what EBITDA is, how to calculate it, and why it matters. You'll start with the definition of EBITDA and an explanation of each component it excludes. We'll explain why companies, investors, and analysts often use EBITDA to compare operational performance across businesses with different capital structures, tax rates, or asset bases.

Next, we'll dive into the formulas used to calculate EBITDA, both from the top-down and bottom-up approach. Using sample income statements, we'll show how to extract the necessary values and compute EBITDA manually so that you understand what goes into the number and how to avoid mistakes.

We'll also examine common variations, including Adjusted EBITDA, and explain when and why companies might adjust EBITDA to reflect unusual, one-time, or non-recurring items. Participants will learn the risks of relying on "customized" EBITDA figures without clear supporting data.

In addition, this session will briefly contrast EBITDA with related metrics like Net Income, Operating Income (EBIT), and Cash Flow from Operations, helping you understand when to use each and how to interpret them in financial reports.

Whether you're preparing for a financial role, analyzing company health, or just trying to become more financially literate, this training will give you the clarity and confidence to understand EBITDA not just repeat it.

Why should you Attend: You can't rely on a number you don't fully understand. If you're working with financial reports, evaluating business performance, or involved in budgeting and forecasting, understanding EBITDA is critical. Misinterpreting it could mean overestimating profitability or missing signs of financial stress.

This session breaks down EBITDA in simple, clear terms. You'll learn how to define it, calculate it from a company's income statement, and apply it appropriately. Whether you're new to finance or brushing up on the basics, this session will give you the confidence to use EBITDA accurately in reports, presentations, and decision-making.

Areas Covered in the Session:

• What EBITDA stands for and what each component means
• Why EBITDA is used and what insights it provides
• EBITDA vs. Net Income vs. Operating Income vs. Cash Flow
• How to calculate EBITDA step-by-step using an income statement
• Top-down and bottom-up approaches to EBITDA calculation
• Example walkthroughs: calculating EBITDA from real-world figures
• Introduction to Adjusted EBITDA and common adjustments
• Risks and limitations of relying solely on EBITDA
• When EBITDA is most useful (valuation, comparisons, performance reviews)
• How to communicate EBITDA accurately in reports and presentations
• Key questions to ask when reviewing EBITDA in financial analysis

• Anyone that works in a financial institution