EBITDA is a measure of a company's core profitability excluding financing decisions, accounting methods, and tax environments. It is widely used for comparing businesses in the same industry and for valuation multiples.
Your business has $500K revenue, $200K COGS, $150K operating expenses, $20K depreciation, and $10K amortization. Your EBITDA is $170K with a 34% margin. At a 5x EBITDA valuation multiple, your business core operations are worth $850K — before accounting for debt, cash, or intangible assets.