Earnings Before Interest, Taxes, Depreciation, and Amortization, abbreviated as EBITDA, is a commonly used financial metric that provides insight into a company's profitability by focusing on its core operations, while excluding costs related to capital structure, taxes, and non-cash expenses. The formula to calculate EBITDA is 'Net Income + Interest + Taxes + Depreciation + Amortization'. By excluding these factors, EBITDA gives a clearer picture of a company’s operational cash flow and is often used to compare the operational efficiency of companies in the same industry.

For example, an investor analyzing companies within the technology sector might use EBITDA to evaluate how well each company manages its operational costs, ignoring the financing and accounting decisions that affect taxes and depreciation. Similarly, a company might use EBITDA as a tool for internal assessment to compare profitability trends over time, especially if external factors affecting interest or tax rates vary. However, while EBITDA provides a useful measure of operating performance, it does not account for the significant cash requirements of taxes, capital expenditures, or debt servicing.