Why earnings before interest, tax and amortisation (EBITA) matters to a first-time founder
EBITA can make businesses with different acquired intangible assets easier to compare because it removes amortisation charges. This is useful in acquisition-heavy sectors, but the adjustment can also hide a real cost of buying assets. Founders should show the bridge from reported profit and avoid presenting the measure without context.
Examples of earnings before interest, tax and amortisation (EBITA)
A software group reports EBIT of ₹70 million after charging ₹12 million of amortisation on acquired customer relationships. Adding that charge back gives EBITA of ₹82 million. Depreciation on servers remains included. The adjustment helps compare operations, but readers still need to understand why the intangible asset and charge exist.
Common misunderstanding
EBITA is not EBITDA. EBITA adds back amortisation but leaves depreciation in the result, whereas EBITDA adds back both. It is also not necessarily a standard accounting subtotal. Companies may adjust additional items, so a figure labelled “adjusted EBITA” requires a detailed reconciliation and consistent policy.
When to use it
Use it when amortisation from acquisitions materially affects comparisons or when a lender, buyer or board specifically tracks it. Keep depreciation included and identify every additional adjustment. Non-standard performance-measure rules differ by jurisdiction and market, so reconcile EBITA to the financial statements and follow applicable presentation guidance.
US spelling: earnings before interest, tax and amortization.