Adjusted EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization, with additional adjustments made to remove non-recurring, irregular, or non-operational items.
Adjusted EBITDA = EBITDA + Adjustments
Adjusted EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization, with additional adjustments made to remove non-recurring, irregular, or non-operational items. It gives a clearer picture of a company’s core operating performance.
The purpose of Adjusted EBITDA is to:
Show a normalized view of profitability
Help investors and analysts compare businesses across sectors and time periods
Exclude one-off events that don’t reflect day-to-day operations
Adjusted EBITDA = EBITDA + Adjustments
Common Adjustments Include:
Used by private equity firms, banks, and investors to assess the real earning power of a business
Helps with business valuations, especially during mergers or fundraising
Offers more consistency when comparing companies with different accounting policies or capital structures
Filters out noise and focuses on operational strength
Helps value companies fairly (especially in M&A deals)
Useful for covenant compliance in debt agreements
Can be manipulated with too many adjustments
Not a standard metric under GAAP or IFRS
May overstate profitability if not disclosed transparently
A company reports ₹100 crore in EBITDA but spent ₹5 crore on a one-time restructuring. The Adjusted EBITDA would be ₹105 crore, showing its earning potential without that unusual expense.