EBITDA
Also known as: Earnings Before Interest Tax Depreciation and Amortisation
Definition
- Author:
- Sorbus Finance
- Reviewed by:
- Arran Turner, 11 November 2026
- Published:
How ebitda works
It starts from an earnings measure and excludes the specified items. Adjusted EBITDA may exclude additional costs, but each adjustment needs a clear explanation. Accounting policy and the treatment of leases can affect comparisons.
Practical UK business example
A business reports £150,000 EBITDA but also needs tax payments, stock investment and debt repayments. Its available cash is therefore not automatically £150,000.
Illustrative example only; not a finance quotation or a client case study.
Why it matters
It can help compare operating earnings before certain financing and accounting charges, provided the calculation and adjustments are consistent.
Limitations and common misconceptions
EBITDA is not free cash flow or a universal lender definition. Revised lease accounting can change the reported figure without improving cash generation, so period-on-period comparisons need care.
Discuss business borrowing to discuss how the structure relates to your business.
Further reading from Sorbus Finance
References
This definition is general information for UK businesses, not personal advice. Lender criteria and product terms vary. Sorbus Finance is a broker, not a lender.