What calculation is needed to determine the total EBITDA of a company with multiple segments?

To determine the total EBITDA of a company with multiple segments, the total EBITDA is calculated by summing the EBITDA of all individual segments. This approach accurately reflects the overall earnings before interest, taxes, depreciation, and amortization for the entire company. Each segment's EBITDA contributes to the total, and combining these values provides a comprehensive view of the company's financial performance.

This method is particularly effective because it maintains consistency and allows for a thorough evaluation of each segment's profitability, enabling analysts and stakeholders to understand how each part of the business contributes to overall performance.

The average of segment EBITDAs would not provide an accurate depiction of total earnings, as it would not be weighted according to the size or profitability of each business segment. Similarly, using the highest segment EBITDA ignores contributions from all other segments, which could lead to a misrepresentation of total earnings. A weighted average based on market value integrates different aspects of the segments but also fails to accurately capture the total EBITDA directly; instead, it aims to reflect an adjusted measure that could obscure the actual operating performance. Thus, summing the segment EBITDAs directly yields the most straightforward and accurate measure of total EBITDA for the company.