EBITDA is earnings before the parts that are earnings.
One illustrative company, top to bottom. Every line below EBITDA is a real bill. Figures in Rs crore.
| Illustrative profit and loss |
Rs cr |
Margin |
| Revenue | 1000 | 100% |
| EBITDA . the slide number | 280 | 28% |
| less Depreciation | 150 | |
| less Interest | 90 | |
| less Tax | 10 | |
| Net profit . the real number | 30 | 3% |
The slide stops at EBITDA. The three lines under it are not optional. Depreciation is the machines wearing out, interest is the debt that bought them, tax is tax. Together they took 250 of the 280. And that cheap looking 8 times EBITDA is 41 times earnings on the profit the owner actually keeps.