What is EBITDA Indicator?
The EBITDA indicator (earnings before interest, taxes, depreciation and amortization) measures profit before finance costs, zakat and income tax, depreciation and amortization. It is used to compare operating performance across periods and between companies with different financing.
How It Works
- Start from net profit and add back finance costs, zakat and income tax, depreciation and amortization, or start from EBIT and add back depreciation and amortization.
- Record relevant transactions in the general ledger with proper classification.
- Monitor key indicators on a monthly or quarterly basis.
- Report progress and variances to management and the board.
- Adjust strategy and operations based on the data.
Saudi Context
For a Saudi business, zakat and income tax are added back together, as in the EBIT line of Qoyod’s income statement; VAT is never added back, because it is not a tax on profit. IFRS does not require EBITDA to be presented in the financial statements, and its definition varies between users, so if a lender or investor defines it differently, follow their definition.
Example
A Riyadh-based trading company applies EBITDA Indicator in its month-end close. The accounting team starts from the EBIT line of its income statement in Qoyod, adds back depreciation and amortization, compares the result against the prior period and budget, and includes a narrative in the monthly management report so leadership can act on the result.
Run your own figures in the EBITDA calculator.