Walk me through EBITDA

EBITDA — earnings before interest, taxes, depreciation, and amortization — is a proxy for the cash a company's core operations generate before capital structure and accounting choices distort the picture. That is why it shows up in valuation multiples and credit analysis.

You can build it two ways. Top-down: start from revenue and subtract operating expenses excluding depreciation and amortization. Bottom-up: start from net income and add back taxes, interest, and D&A. Being fluent in both directions is what interviewers are checking.

The caveat worth voicing: EBITDA ignores real costs. It excludes the capital expenditures needed to sustain the business and the interest on the debt used to finance it, so a high-EBITDA company can still be cash-poor. Naming that limitation signals judgment, not just recall.