The measure strips out three things that vary for reasons unrelated to how well the operations run: how the company is financed, which drives interest; where and how it is taxed; and the accounting estimates that spread past capital spending over time as depreciation and amortisation. What remains is a figure that lenders write into covenants, that acquirers use in enterprise value multiples, and that management teams like to headline. That last use is the problem, because neither IFRS nor US GAAP defines the measure, so each company decides what goes into its version.
What the rule-makers require
In the United States, the SEC staff's interpretations on non-GAAP measures read EBITDA strictly as net income before interest, taxes, depreciation and amortisation, and say a measure calculated any other way should carry a distinct title such as adjusted EBITDA. A registrant presenting it must give the most directly comparable GAAP figure equal or greater prominence and reconcile the two. Under IFRS 18, which takes effect for reporting years that start in 2027 or later, company-specific subtotals of income and expenses used in public communications become management-defined performance measures that must be explained in the notes to the financial statements. Whether a particular EBITDA variant falls inside that scope depends on how it is built, so read the note rather than assume.
Reading it against cash
For analysis, set EBITDA beside operating cash flow and capital spending and watch the gap. EBITDA rising while operating cash stays flat often traces back to working capital: receivables or stock growing faster than sales. Debt expressed as a multiple of EBITDA is the usual shorthand for corporate leverage in lending, which is one more reason the definition in the loan agreement matters. Reconciling the headline number to the audited statements is routine work in financial analysis and modelling.