Valuation Terms

Adjusted EBITDA

EBITDA after adding back or removing unusual, one-time, or owner-specific expenses so buyers can see the business’s normal earning power. Why it matters: Buyers will test every adjustment, so each add-back should be reasonable, documented, and tied to costs that truly will not continue after the sale.

Related terms

EBITDA

Earnings before interest, taxes, depreciation, and amortization. In plain English, it is a common estimate of business profit before certain accounting and financing costs. Why it matters: Many buyers use EBITDA to compare businesses, estimate debt capacity, and set valuation, so small changes to EBITDA can have a large impact on price.

More from Valuation Terms

Add-Backs CapEx Cash Flow EBITDA Enterprise Value Equity Value Free Cash Flow Gross Margin Gross Profit Multiple Net Income Net Working Capital

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