EBITDA
Earnings before interest, tax, depreciation and amortisation. A proxy for operating cash generation, widely used in private equity valuation and covenant tests.
EBITDA explained
Earnings before interest, tax, depreciation and amortisation is used as a proxy for operating cash generation and as the base for leverage multiples and valuations. Its weakness is definitional: adjusted figures vary by what the parties agree to add back, so two parties can describe the same company with materially different numbers.
How it works in practice
- Adjustments are itemised and agreed rather than presented as a single adjusted figure.
- The definition used in the credit agreement governs covenant testing.
- Quality of earnings findings are carried into the monitoring baseline.
Common mistake
Accepting an adjusted figure without the bridge from reported earnings, which hides the assumptions driving valuation.
Why it matters in private capital
EBITDA sits inside a chain of decisions that runs from sourcing through diligence, investment committee, portfolio monitoring and LP reporting. When each stage lives in a different tool, the evidence behind the decision is rebuilt at every handover. Keeping the concept on one record is what makes the fund able to explain, not just report, what it did.
How Reuben AI handles EBITDA
Reuben AI is one platform for the full private capital workflow. Deal intake and screening at /deal-flow-management, diligence and IC memos at /ic-memo-software, portfolio monitoring and LP reporting at /lp-reporting-software all read from the same record, so EBITDA does not need to be re-entered per tool. Pricing is at /pricing.
Frequently asked questions
What is EBITDA?
Earnings before interest, tax, depreciation and amortisation. A proxy for operating cash generation, widely used in private equity valuation and covenant tests.
How does EBITDA work in practice?
Earnings before interest, tax, depreciation and amortisation is used as a proxy for operating cash generation and as the base for leverage multiples and valuations. Its weakness is definitional: adjusted figures vary by what the parties agree to add back, so two parties can describe the same company with materially different numbers.
What is the most common mistake with EBITDA?
Accepting an adjusted figure without the bridge from reported earnings, which hides the assumptions driving valuation.
How does Reuben AI handle EBITDA?
Reuben AI keeps EBITDA on the same record as sourcing, diligence, investment committee, portfolio monitoring and LP reporting, so the underlying evidence does not have to be rebuilt for each workflow.
Related terms
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