## What is EBITDAL?

Earnings before interest, taxes, depreciation, amortization, and special losses (EBITDAL) is a measure of a company's operating performance. Essentially, it's a way to evaluate a company's performance without having to factor in financing decisions, accounting decisions, unusual events or tax environments.

EBITDAL is calculated by adding back the non-cash expenses of depreciation and amortization as well as expenses related to special losses.

## How to Calculate EBITDAL

EBITDAL is calculated using the company’s income statement. It is not included as a line item, but can be easily derived by using the other line items that must be reported on an income statement.

The formula for EBITDAL is:
EBITDAL = EBIT + Depreciation + Amortization + Special Losses

Let's take a look at a hypothetical income statement for Company XYZ:

Using the formula above, Company XYZ's EBITDAL is:

EBITDAL = \$750,000 + 100,000 + 50,000 + 10,000 = \$910,000

## EBITDAL vs EBITDA

EBITDA is one of the operating measures most used by analysts, but EBITDAL is far less popular. EBITDAL does not factor in the direct effects of financing decisions, making it easier to compare companies' operating performance, but it also does not factor in unusual events that may skew results or not be characteristic of the company on a normal basis. As a result, EBITDAL allows analysts to focus on the outcome of operating decisions while excluding most of the impacts of non-operating decisions. This allows investors to focus on normal operating profitability as a singular measure of performance. Such analysis is particularly important when comparing similar companies across a single industry.

EBITDAL, like EBITDA, can also be deceptive when applied incorrectly. It is especially unsuitable for firms saddled with high debt loads or those that must frequently upgrade costly equipment. Furthermore, EBITDAL can be trumpeted by companies with low net income or poor management (which may have generated the special items or in some cases cannot run a steady business) in an effort to 'window-dress' their profitability. Accordingly, some critics argue that the L in EBITDAL should stand for 'lifestyle decisions' and can be particularly useful for valuing family-owned businesses. EBITDAL will almost always be higher than reported net income.

Also, because EBITDAL isn't regulated by Generally Accepted Accounting Principles (GAAP, a framework of accounting standards, rules and procedures), investors are at the discretion of the company to decide what is and is not included in the calculation from one period to the next. Therefore, when analyzing a firm's EBITDAL, it is best to do so in conjunction with other factors such as capital expenditures, changes in working capital requirements, debt payments, and, of course, exceptional items.