Earnings before interest, taxes, depreciation, and amortisation measure a company’s overall financial performance and are used as an alternative to the net income in some circumstances.
EBITDA, however, can be misleading because it strips out the cost of capital investments like property, plants, and equipment.
This metric also excludes expenses associated with debt by adding back interest expenses and taxes to earnings however it is a more precise measure of corporate performance since it is able to show earnings before the influence of accounting and financial deductions.
The U.S. generally accepted accounting principles because there is no legal requirement for companies to disclose their EBITDA however it can be worked out and reported using the information found in a company’s financial statements.