What is EBITDA and how is it translated?
This term always appears in translations or papers on economy and finance. In Spanish, the acronym in English is generally used. Thus, we would like to explain its meaning.
EBITDA is a financial ratio, which stands for "Earnings Before Interest Taxes, Depreciation and Amortization," and in Spanish is translated as "beneficio antes de intereses, impuestos, depreciaciones y amortizaciones" but it is also known by its acronym in English. This ratio shows the earnings excluding the interests payable on debts, taxes, depreciations and amortizations. The purpose of EBITDA is to get a trustworthy image of the company's profits and losses on the overall financial performance. It is important to emphasize that EBITDA does not show the cash flow of the business since it does not include the variation of working capital or investments in fixed term deposits.
This is a very useful ration, among other things, to show the information related to financial leverage.
It must not be misled by EBIT ratio. EBIT shows the profitability of the production levels of a company and the acronym stands for Earnings Before Interest and Taxes and in Spanish is translated as "beneficio antes de intereses e impuestos". That is to say, it does not include in the calculations the interests and taxes payables.