Start with the GAAP figure
Find net income and rebuild the base EBITDA calculation. Keep the sign and unit of each item clear.
Check Can you trace every number back to the filing?
EBITDA · four ideas0 of 4 ideas marked read on this device
Free course · Module 5
EBITDA: what it shows and leaves out
Rebuild the number, question adjustments and compare it with cash flow.
Written by the StockEducation Editorial Team · Reviewed by Associate Professor Charles Lo, CPA, PhD · Updated 15 Oct 2026 · How we check lessons
Pick a topic to learn
Read in order, or return to the idea you need.
Idea 1 of 4
Rebuild EBITDA from net income.
EBITDA means earnings before interest, taxes, depreciation and amortization. Start with GAAP net income, then add back those expenses. It is a non-GAAP performance measure, not money available to spend.
Depreciation spreads the cost of physical assets over their useful lives. Amortization does the same for certain intangible assets. Adding them back does not remove the need to replace equipment or invest in the business.
Net income$17,608M
+ Income taxes$5,064M
+ Interest$6,694M
+ Depreciation & amortization$18,349M
= EBITDA$47,715M
Why not start with operating income?
Operating income plus depreciation and amortization can differ from EBITDA built from net income because of items below the operating line. SEC staff guidance says EBITDA should reconcile to GAAP net income when used as a performance measure. Check the company’s exact definition and reconciliation. Source 3.
EBIT stops before the depreciation and amortization add-back. EBITDA margin divides EBITDA by revenue; comparisons need consistent definitions, periods and a relevant industry peer.
The formula
Net income + income taxes + interest + depreciation + amortization = EBITDA.
Marks Idea 1 read on this device
Idea 2 of 4
EBITDA is not cash flow.
EBITDA and cash flow answer different questions. EBITDA does not account for cash tied up in receivables or inventory. It is measured before interest and income-tax expense, and it never subtracts capital spending.
Free cash flow often means operating cash flow minus capital expenditures. Definitions vary: read the reconciliation. It is not automatically cash that can be distributed, because a business may still need to repay debt or meet other commitments.
EBITDA$47.7BPerformance measure
Operating cash$37.1BCash from operations
Free cash flow$20.1BAfter capital spending
What should you compare over time?
Use matching fiscal years. Compare net income, EBITDA, operating cash and capital spending over at least three years. Read the working-capital explanation and identify acquisitions or classification changes before interpreting a gap.
A high EBITDA margin does not establish a strong cash balance, a sustainable dividend or a cheap share price.
Keep the distinction
An accounting add-back does not cancel a real economic cost.
Marks Idea 2 read on this device
Idea 3 of 4
Adjusted means: read the adjustments.
Adjusted EBITDA adds or removes items beyond the standard formula. A reconciliation shows the changes. Definitions differ between companies, so two figures with the same label may not be comparable.
Read every extra adjustment
Look for stock-based pay, restructuring and other exclusions. Ask what the item represents and whether it repeats.
Check Does the adjustment clarify performance, or hide an ongoing cost?
Compare the same measure
Use consistent definitions and periods. Read both companies’ reconciliations before comparing margins or valuation multiples.
Check A larger denominator can make EV/EBITDA look lower without changing enterprise value.
EBITDA$47,715MBase measure
Net adjustments+$2,282MRead the reconciliation
Adjusted EBITDA$49,997MDifferent measure
What does SEC staff guidance say?
Measures calculated differently from the standard EBITDA formula need a distinct title, such as adjusted EBITDA. Excluding recurring operating costs can still mislead, even when an adjustment is explained. A reconciliation helps you inspect a measure; it does not guarantee that the presentation is useful. Source 3.
Your question
What was added back, why was it added back, and does it happen again?
Marks Idea 3 read on this device
Idea 4 of 4
Try the calculation, then check the filing.
Reproduce the published calculation before changing the inputs. Use matching periods and units. The starting figures below are from Verizon’s 2025 reconciliation; the result is historical, not a forecast.
Build EBITDA from four inputs
US dollars · millionsUse expense amounts as positive add-backs. Enter a tax benefit as a negative number. A net loss stays negative.
Calculated EBITDA$47,715M17,608 + 5,064 + 6,694 + 18,349
This model adds the four inputs. It does not calculate cash flow, adjusted EBITDA, fair value or an investment recommendation.
Open the Profitability Calculators →Apply the same routine to a filing
- Find a company’s income statement and cash-flow statement.
- Rebuild EBITDA from net income and label every add-back.
- Compare operating cash with capital spending and check the free-cash-flow definition.
- Read any adjusted EBITDA reconciliation and identify repeated exclusions.
- Record the filing date, definitions and one unanswered question.
Before moving on
Explain why EBITDA can be large while cash available after reinvestment is much smaller.
Marks Idea 4 read on this device
Quick check
Three quick checks. Feedback straight away.
Question 1 of 3
Verizon’s 2025 net income was $17,608 million, taxes $5,064 million, interest $6,694 million, and depreciation and amortization $18,349 million. What was EBITDA?
Choose an answer
Choose an answer to see the explanation.
Which cost does free cash flow subtract that EBITDA never does?
Choose an answer
Choose an answer to see the explanation.
A company adds back stock pay and restructuring costs on top of EBITDA. Under SEC staff guidance, what should it call the result?
Choose an answer
Choose an answer to see the explanation.
Why can large EBITDA leave little cash to spare?
EBITDA is measured before interest and income-tax expense, does not subtract capital spending, and does not capture working-capital changes. Cash payments and reinvestment can absorb money even when EBITDA looks strong. Use the cash-flow statement and reconciliation rather than treating EBITDA as a cash balance.
Review your takeaway card and the learning path
- Rebuild the number. Start with net income and add interest,taxes,depreciation and amortization.
- Cash is different. Check operating cash, capital spending and other commitments.
- Inspect adjustments. A different definition needs a clear label and reconciliation.
- Compare consistently. Use matching periods and definitions; record what remains uncertain.
Reading markers and these practice checks stay on this device. They do not mark the LMS lesson complete.
Sources and assumptions
- Verizon, 2025 Form 10-K,filed February 17, 2026. EBITDA reconciliation and financial statements;all figures are historical.
- Verizon, 2025 earnings release,January 30, 2026. Consolidated EBITDA/adjusted EBITDA and free-cash-flow reconciliations.
- SEC staff,Non-GAAP Financial Measures. Questions 100.01,100.05,103.01 and 103.02: recurring costs,labels,definitions and reconciliation.
The model reproduces arithmetic from dated published figures. EBITDA and free cash flow are non-GAAP measures;check each company’s definitions. This page does not judge the investment value of Verizon or any other security.
StockEducation provides general education, not personal financial, tax or legal advice. Nothing here recommends a specific security. Investing involves risk, including loss of money you invest.
