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EBIDTA – Key Words & Phrases | Sklover Working Wisdom
What is the meaning of: "EBIDTA"? Often when reviewing or negotiating employment contracts, bonus agreements, and stock award plans, we come across an accounting term that is not a real word, but an acronym: EBIDTA. It stands for "Earnings Before Interest, Depreciation, Taxes and Amortization." It is commonly viewed to be a measure of the profitability of a company. It is supposed to measure net income, with interest, taxes, depreciation and amortization added back in to it. It is used to analyze and compare profitability because it eliminates financing and accounting decisions and their effects. Most often we see EBIDTA in employment-related agreements or benefit plans as a condition of payment of bonuses, vesting of equity, or other employee rights or entitlements. For example, "Your stock options will vest if, during the previous fiscal year, the company's EBIDTA exceeds $30 million." Here's another example: "Annual bonuses will be distributed only if the company achieves EBIDTA of