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Profit before interest, taxes, depreciation, and amortization ( PBITDA )
Written by Kenny Foo   
Saturday, 07 March 2009 11:24

Investment Formula Description

Profit before interest, taxes, depreciation and amortization ( PBITDA ) is an investment formula to calculate profit for corporation by excluding expenses for interest, taxes , depreciation,  and amortization.

Profit before interest, taxes, depreciation and amortization ( PBITDA ) is also referred as earnings before interest, taxes, depreciation and amortization ( EBITDA ). Unlike profit before interest and taxes ( PBIT ), profit before interest, taxes, depreciation and amortization ( PBITDA ) excluded the expenses for depreciation and amortization. The reason to exclude depreciation and amortization is because both are not actual payments that pay out from the corporation. Profit before interest, taxes, depreciation and amortization ( PBITDA ) can be obtained by adding back expenses for interest, taxes, depreciation and amortization into net profit. Normally, profit before interest, taxes, depreciation and amortization ( PBITDA ) are used by corporations with high depreciation and amortization to reflect the actual profit for the corporations.

 

Investment Formula

Profit before interest, taxes, depreciation and amortization ( PBITDA )  = Net Profit + Interest + Taxes + Depreciation + Amortization

 

Investment Formula Example

Corporation ABC has $70,000 net profit  for this financial year and it  had paid $10,000 interest and $1,000 taxes. Based on accrual accounting, it needs to charge $10,000 for depreciation and $10,000 for amortization.  The profit before interest, taxes, depreciation and amortization ( PBITDA ) calculation is as following.

Profit before interest, taxes, depreciation and amortization ( PBITDA )  = Net Profit + Interest + Taxes + Depreciation + Amortization = 70,000 + 10,000 + 1,000 + 10,000 + 10,000 = $101,000

Profit before interest, taxes, depreciation and amortization ( PBITDA ) for corporation ABC is $ 101,000 after adding back its interest, taxes, depreciation and amortization into net profit.



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Last Updated ( Thursday, 12 March 2009 11:02 )
 
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