Adjusted EBITDA
Principles of Finance glossary · Time Value of Money
Definition
EBITDA modified to remove non-recurring, one-time, or non-cash items; commonly used in lender covenants and PE valuation.
Adjusted EBITDA in plain English
EBITDA is a rough measure of a company's core operating profit (earnings before subtracting interest, taxes, and the accounting charges for wear-and-tear on equipment). "Adjusted" EBITDA goes a step further and strips out weird one-off items — a lawsuit payout, a factory fire, moving costs — that won't happen again, so you can see what the business normally earns in a typical year. The idea is to show the "clean" ongoing profitability. The catch: companies get to decide what counts as "one-time," so it's worth checking they're not just hiding costs they'd rather you ignore.
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