BITDA stands in short for Earnings Before Interest, Taxes, Depreciation and Amortization.

When you think about your income statement, there’s revenue, there’s types of expenses and subtotal lines. There’s also the financial income and expenses, tax expense and at the bottom there’s the net profit after tax. To reach a company’s EBITDA you take this net profit and add back expenses like tax and interest for this period, you also add back depreciation and amortization for assets and as you do that, you reach the EBITDA for the period. Essentially one could say that EBITDA is what your operations earn you taking back non-cash expenses like depreciation and amortization as well as other expenses not related to business operations. 

When looking at EBITDA, it excludes expenses affected by significant management estimates like useful lives for assets that impacts the depreciation recognized in the accounts and it excludes interest expenses connected to loans as well as taxes which may be subject to various specific treatments. What EBITDA does, is make performance of entities comparable again.

Note also that once the EBITDA is positive, the company is running profitable and is expected to be making good. However, if the EBITDA is negative, it means the company is performing poorly, it’s operations are earning losses and as such, has a strong indication of being in severe financial problems in near future.