8/19/2019 EBIT vs. EBITDA vs. Net Income Valuation Metrics and
Multiples
1/3
What are the Differences Between EBIT, EBITDA, and Net
Income?
These metrics differ in terms of:
1. Who the Money is Avaia!e to "" E#$ity investors, de!t
investors, and the %overnment? &$st e#$ity
investors? 'omeone ese?
(. )*eratin% E+*enses vs. a*ita E+*endit$res "" 'ome metrics
refect the im*act of !oth of these,
whereas others ony refect the im*act of )*eratin% E+*enses and
i%nore s*endin% on on%"term assets.
-. Interest, Ta+es, and Non"ore B$siness Activities "" 'ome
metrics inc$de these, and some e+c$de
them.
. When They/re 0sef$ "" 'ometimes yo$ WANT to refect the im*act
of a*E+, a**ro+imatin% ree
ash ow, and sometimes yo$ don/t. 'ame for interest and
ta+es.
2ere/s the s$mmary of differences, !y cate%ory:
2ow Do 3o$ ac$ate It?
EBIT 4 )*eratin% Income on the Income 'tatement
EBITDA 4 )*eratin% Income on the Income 'tatement 5 De*reciation
6 Amorti7ation from the '
Net Income 4 Net Income on the Income 'tatement
They orres*ond To...
EBIT corres*onds to Enter*rise 8a$e. E8 9 EBIT is the
m$ti*e.
EBITDA corres*onds to Enter*rise 8a$e. E8 9 EBITDA is the
m$ti*e.
Net Income corres*onds to E#$ity 8a$e. 9 E is the m$ti*e.
Who 2as a aim on the Money?
or EBIT and EBITDA, e#$ity investors, de!t investors, and the
%overnment a have a caim.
or Net Income, ony e#$ity investors have a caim !eca$se de!t
investors have !een *aid with interest,and the %overnment has !een
*aid with ta+es.
What Does It Mean?
EBIT = Core, recurring business profitability, before the impact
of capital structure and taxes.
EBITDA = roxy for core, recurring business cash flo! from
operations, before the impact of
