Question

How is EBITDA different from Net Income?

Answer 1

Imagine that on top of your expenses of your lemonade stand you have to pay taxes (for example to be allowed to sell on the street).

Imagine as well that you need to put money aside to invest in a new machine or a new stand because your machine is getting old.
This is called depreciation.

In EBITDA, you don’t take consideration these expenses.

But the net income is what remains as profit after all these expenses are taken in account.

Answer 2

EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is a measure of a company's profitability that excludes non-operating expenses such as interest, taxes, depreciation, and amortization. It is calculated by subtracting these expenses from a company's revenue. Net income, on the other hand, is the profit a company earns after deducting all expenses, including interest, taxes, depreciation, and amortization. It is the bottom-line figure that represents the actual profit earned by a company after all expenses have been accounted for. The main difference between EBITDA and net income is that EBITDA provides a clearer picture of a company's operating performance by excluding non-operating expenses, while net income takes into account all expenses. EBITDA is often used by investors and analysts to evaluate a company's profitability and financial health, while net income is used to determine the amount of taxes owed and to assess a company's overall financial performance.