---
title: "What is ebitda?"
description: "Ebitda explained in plain English: definition, how it works, an example, and how it appears in QuickBooks and Xero."
url: https://ledgerbpo.com/glossary/ebitda/
updated: 2026-09-11
publisher: LedgerBPO (SS Support Network LLC)
language: en-US
---

# What is ebitda?

Glossary

EBITDA stands for earnings before interest, taxes, depreciation, and amortization. It is a measure of a business's core operating profit that strips out financing decisions, tax situations, and non-cash accounting charges to make performance easier to compare.

Updated September 2026

## How ebitda works

EBITDA starts with net income and adds back interest, taxes, depreciation, and amortization, costs that do not reflect how well the core business is actually operating. Depreciation and amortization in particular are non-cash charges that spread the cost of an asset over time rather than reflecting cash spent in the current period. Some businesses also calculate an adjusted EBITDA, which further removes one-time or unusual costs to show a cleaner ongoing performance figure.

Investors and lenders often use EBITDA to compare businesses with different debt levels, tax situations, or asset bases, since it removes those differences from the comparison. EBITDA is not a substitute for net income and does not represent actual cash flow, since it ignores real costs like debt payments and capital spending. Because EBITDA excludes real costs like debt payments and equipment purchases, relying on it alone can hide serious cash flow problems.

## Example

A business reports net income of $60,000, interest expense of $15,000, taxes of $10,000, and depreciation of $25,000. EBITDA equals $60,000 plus $15,000 plus $10,000 plus $25,000, which is $110,000. This higher number reflects operating performance before the effects of financing, taxes, and non-cash depreciation charges.

## EBITDA in QuickBooks Online vs Xero

Not software-specific: QuickBooks Online and Xero both provide net income, interest expense, and depreciation figures on standard reports, but neither calculates EBITDA as a labeled line item. It is typically calculated in a spreadsheet or a connected financial reporting tool by combining those report figures. Getting an accurate EBITDA figure depends entirely on the underlying net income, interest, tax, and depreciation numbers being correct.

## Related terms

- [Net income](https://ledgerbpo.com/glossary/net-income/)
- [Depreciation](https://ledgerbpo.com/glossary/depreciation/)
- [Amortization](https://ledgerbpo.com/glossary/amortization/)
- [All terms](https://ledgerbpo.com/glossary/)

## How LedgerBPO handles ebitda

We calculate EBITDA as part of your monthly reporting package, pulling accurate figures for interest, taxes, depreciation, and amortization straight from your closed books. A dedicated accountant makes sure the underlying numbers are correct before the calculation is made. You get a reliable EBITDA figure ready for a lender, investor, or buyer conversation. We also flag when EBITDA and actual cash flow are moving in different directions, since that gap matters.

[Reports your lender, investor and you will actually read](https://ledgerbpo.com/services/financial-reporting/)

Next step

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Source: https://ledgerbpo.com/glossary/ebitda/ · Contact: https://ledgerbpo.com/contact/ · Full site map for agents: https://ledgerbpo.com/llms.txt