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EBITA

What is 'EBITA'

EBITA is an acronym for earnings before interest, taxes and amortization. To calculate a company's EBITA, start with its earnings before tax (EBT), which can be found on the income statement, and add interest and amortization expenses back in. EBITA is a variation of the more commonly used EBITDA, which deducts depreciation expenses. Both are used to gauge a company's operating profitability, that is, the earnings it generates in the normal course of doing business, ignoring capital expenditures and financing costs. Both measures are sometimes considered indications of cash flow.

Explaining 'EBITA'

As a telecom, AT&T Inc. (T) must invest in, maintain and periodically replace a massive portfolio of fixed assets in order to keep its network running. As of December 31, 2014, its balance sheet showed net property, plant and equipment assets of $113 billion, compared to total assets of $293 billion and current assets of just $32 billion. Seeing that, investors should be hesitant to ignore depreciation on these assets; in other words, an EBITDA calculation for AT&T would hide more than it would show. Calculating EBITA, however, is tricky given the presentation of the income statement (all figures in millions of USD): 

EBITA in Context

EBITDA emerged in the 1980s during a spate of leveraged buyouts. It was intended to give a picture of how well a company could service its debts, but soon took on a life of its own, becoming a way to state more attractive earnings than the actual bottom line. Since it is a non-GAAP​ measure, there is no requirement that companies use consistent criteria when calculating EBITDA from quarter to quarter. Further adjustments can be made to the already-adjusted figure, in effect allowing for subjective interpretations of a company's "true" earnings.


Further Reading


EBITDA, EBITA, or EBIT?
papers.ssrn.com [PDF]
… This section explains the arguments for and against using EBITDA or EBITA instead of EBIT to … economic profitability and yet report very different EBITDA if they differ in their capital … EBITDA), while debt-financed asset acquisitions and capital leases (now called finance leases) …

The right role for multiples in valuationThe right role for multiples in valuation
papers.ssrn.com [PDF]
… This section explains the arguments for and against using EBITDA or EBITA instead of EBIT to … economic profitability and yet report very different EBITDA if they differ in their capital … EBITDA), while debt-financed asset acquisitions and capital leases (now called finance leases) …

Impact of ISO 9001 certification on firms financial operating performanceImpact of ISO 9001 certification on firms financial operating performance
www.emerald.com [PDF]
… This section explains the arguments for and against using EBITDA or EBITA instead of EBIT to … economic profitability and yet report very different EBITDA if they differ in their capital … EBITDA), while debt-financed asset acquisitions and capital leases (now called finance leases) …

Peer bank behavior, economic policy uncertainty, and leverage decision of financial institutionsPeer bank behavior, economic policy uncertainty, and leverage decision of financial institutions
www.sciencedirect.com [PDF]
… This section explains the arguments for and against using EBITDA or EBITA instead of EBIT to … economic profitability and yet report very different EBITDA if they differ in their capital … EBITDA), while debt-financed asset acquisitions and capital leases (now called finance leases) …

Are there differences in capital budgeting procedures between industries? An empirical studyAre there differences in capital budgeting procedures between industries? An empirical study
www.tandfonline.com [PDF]
… This section explains the arguments for and against using EBITDA or EBITA instead of EBIT to … economic profitability and yet report very different EBITDA if they differ in their capital … EBITDA), while debt-financed asset acquisitions and capital leases (now called finance leases) …

ARCHER HTR in support of a coal-to-liquids process. an economic feasibility viewARCHER HTR in support of a coal-to-liquids process. an economic feasibility view
repository.nwu.ac.za [PDF]
… This section explains the arguments for and against using EBITDA or EBITA instead of EBIT to … economic profitability and yet report very different EBITDA if they differ in their capital … EBITDA), while debt-financed asset acquisitions and capital leases (now called finance leases) …



FAQ


What is EBITA?

Earnings before interest, taxes, depreciation and amortization.

What does EBITA stand for?

Earnings Before Interest Taxes Depreciation Amortization.

How is EBITA abbreviated?

EBITDA (pronounced "E-B-T-D-A").

What does the acronym stand for?

Earnings Before Interest Taxes Depreciation And Amortization.

Why is it important to know how to pronounce this acronym correctly?

It's important to be able to pronounce acronyms correctly because if you don't then people will have a hard time understanding what you're saying and may think that you are talking about something else entirely. For example, if someone were to say "I'm going on an EBIDA" instead of "I'm going on an EBITDA", they would probably be misunderstood by most people listening to them.

Is there another way of pronouncing this acronym besides the one given in the article?

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