Read a lot about how to assess a company’s health, but often you have to count so many numbers that the important things get overlooked. That’s where the EBITDA calculation comes in—an essential tool for professionals analyzing how a company truly operates.

In simplified terms, the EBITDA calculation means earnings before interest, taxes, depreciation, and amortization. Sounds complicated? In fact, it’s a pretty straightforward way to see how much cash a company really generates from its core operations. Unlike net profit, which includes every possible expense category, EBITDA focuses on what truly matters for operational decisions.

So what does it all mean? E stands for earnings before interest, which includes all expenses related to loans. T stands for taxes required by the government. D means depreciation, which is a non-cash expense showing that fixed assets lose value. A stands for amortization, which works similarly, but for intangible assets. Once you understand these components, the EBITDA calculation becomes much clearer.

On a practical level, accountants use two basic formulas. The first: net profit plus interest, taxes, depreciation, and amortization. The second: operating income plus depreciation and amortization. Both methods lead to the same result—only they start from different points.

But how do you know whether the figure you calculated is good? This is where EBITDA peļņa comes in. It is simply your calculated EBITDA divided by total revenue. The higher this percentage, the better the company converts revenue into actual profit. That’s very important because it shows whether the company has growth potential—or whether it’s just operating superficially.

For company owners, the EBITDA calculation provides a real picture of what their business is actually worth. For investors and potential buyers, it’s an important figure because it shows operational strength without distortions from financial and tax structures. That’s why you see this calculation so often in quarterly reports and investment analyses.