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Measures of earnings

What are the commonly-used measures of earnings?

The commonly-used measures of earnings are:

  • EBITDA – meaning Earnings before Interest, Tax, Depreciation and Amortisation
  • EBIT – meaning Earnings before Interest and Tax
  • Profit before Tax – meaning Earnings before Tax

Why is it important to understand the different measures of earnings in a transaction context?

A prospective buyer will want to understand the different measures of earnings (adjusted for any non-market costs which will not continue post-sale) in order to place a value on your company.

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