Why it matters
It can help compare operating results where funding arrangements or depreciation policies differ. However, the calculation should be clearly defined and reconciled to the accounts. Adjusted EBITDA adds further judgement, so understand every adjustment before using the figure in lending, valuation or performance discussions. It should sit alongside other financial information.
A practical example
Using a consistent simplified calculation, operating profit of £30,000 after £5,000 depreciation and £2,000 amortisation gives EBITDA of £37,000. Interest and tax would also be excluded if starting from a figure after those charges. Always check which profit measure is being used as the starting point.
A common misunderstanding
EBITDA is not cash available to spend. It does not show stock purchases, unpaid customer invoices, equipment replacement or loan principal repayments. A business can show positive EBITDA and still have cash problems. Compare it with working capital, capital needs and a cash forecast.
General information for UK readers, updated 3 November 2026. Examples are illustrative. Tax treatment depends on the facts and current rules; seek advice before making a decision.