How is it computed?
EBITDA = Net Profit + Interest + Taxes + Depreciation + Amortization.
What is not included in EBITDA?
EBITDA helps us see the pure profitability of a business, which is why it does not include:
- Financial expenses or loan interest.
- Income taxes.
- Depreciation and amortization.
- Tax strategies or debt structures.
It allows us to compare businesses, assess their value, or understand their true cash-generating capacity. However, IT IS NOT CASH IN THE BANK — it’s an accounting metric, because the following still need to be deducted to get the cash:
- Investments.
- Debt repayments.
- Actual taxes.
- Changes in working capital.
When is EBITDA useful for your business?
We can use it to identify internal trends and assess operational efficiency. But we can't use it on its own — we will always consider it alongside:
- Operating cash flow.
- Net income.
- Debt and investment analysis.
At the end, we use it to evaluate the firm’s ability to generate profits based solely on its productive activity. Therefore, it is not intended to measure the company's liquidity.
How does Forge Flow help you?
Forge Flow automates EBITDA calculation by pulling data directly from your accounting systems.
It presents the information in a clear, visual format, with detailed breakdowns and period comparisons. Additionally, it allows you to integrate EBITDA with other key metrics and set up alerts for actively tracking performance.