Adjusted EBITDA
EBITDA plus or minus adjustments for items a company or seller argues are not part of normal, ongoing operations.
Adjusted EBITDA starts from EBITDA and adds back costs such as above-market owner pay, one-time legal settlements and restructuring, and deducts non-operating gains. The aim is to show the earnings a buyer could expect from the ongoing business.
There is no standard list of adjustments. In a sale, a buyer reviews each one and accepts some, part of some and rejects others, so a seller’s adjusted EBITDA is usually higher than a buyer’s. Public companies must label any EBITDA that includes adjustments beyond interest, taxes, depreciation and amortization as adjusted EBITDA and reconcile it to net income.
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