---
title: "What Is EBITDA? Private Equity Glossary | Capstreet"
description: "EBITDA is a company's earnings before interest, taxes, depreciation and amortization. Buyers use it as a quick measure of operating cash earnings and as the base..."
url: https://capstreet.multisites.ai/glossary/ebitda
publisher: Capstreet
phone: +1-713-332-2700
contact: https://capstreet.multisites.ai/contact
---

Valuation

# EBITDA

EBITDA is a company's earnings before interest, taxes, depreciation and amortization. Buyers use it as a quick measure of operating cash earnings and as the base for setting a price.

EBITDA stands for earnings before interest, taxes, depreciation and amortization. It strips out financing choices, tax setups and accounting write-downs. What remains is a simple view of how much cash the operations earn.

For example, a services company has $20 million in revenue, pays $16 million in operating costs and has $4 million left. That $4 million is its EBITDA. Two companies with the same EBITDA look alike to a buyer, even if one carries more debt.

Owners should know their EBITDA because it drives price. Most lower middle market deals are priced as a multiple of it. Capstreet states its target size this way: "$3 to $15 million of EBITDA". A cleaner EBITDA, backed by good books, supports a stronger offer.

Read how buyers turn this number into a price in [how private equity values a business](https://capstreet.multisites.ai/guides/how-private-equity-values-a-business). See also [EBITDA multiple](https://capstreet.multisites.ai/glossary/ebitda-multiple) and [adjusted EBITDA](https://capstreet.multisites.ai/glossary/adjusted-ebitda).

[Read nextCapstreet deal criteria: the companies we look for](https://capstreet.multisites.ai/deal-criteria)

## Related terms

-   [EBITDA Multiple](https://capstreet.multisites.ai/glossary/ebitda-multiple)
-   [Adjusted EBITDA](https://capstreet.multisites.ai/glossary/adjusted-ebitda)
-   [Add-Backs](https://capstreet.multisites.ai/glossary/add-backs)

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