ClearCFO learning guide · Updated 27 September 2026 · Educational information
Keep the starting point visible
EBITDA is earnings before interest, income tax, depreciation and amortisation. Reconcile the starting measure to the financial statements. Adjusted EBITDA adds another layer of specified changes and does not have one universal definition.
Test every adjustment
Ask whether the amount is already in the starting EBITDA, whether it is genuinely unusual, whether a replacement cost remains and whether it has been counted elsewhere. Removing a cost while ignoring a related gain can bias the result.
Be careful with recurring costs
A recurring operating cost is not made exceptional by giving it an unusual label. Owner compensation should reflect a supportable replacement cost, not simply be removed. Run-rate savings may depend on actions not yet completed.
Read the limits
EBITDA omits working-capital funding, capital expenditure, tax and financing cash flows. It is not cash generation. The cited SEC guidance addresses US public-company disclosure; it is a useful caution on presentation, not a statement of the rules applicable to every Indian company.
Further reading: SEC: non-GAAP financial measures guidance.
Examples are illustrative and simplified. Apply definitions and assumptions appropriate to your business; obtain professional review for material decisions. Read the financial disclaimer.