What best describes the relationship between depreciation and EBITDA?

The relationship between depreciation and EBITDA is best captured by the understanding that EBITDA, which stands for Earnings Before Interest, Taxes, Depreciation, and Amortization, explicitly excludes depreciation from its calculation. This means that when calculating EBITDA, depreciation expenses are not considered, allowing EBITDA to serve as a measure of a company's operational performance without the effects of accounting decisions regarding long-term asset depreciation.

This exclusion is significant because it enables stakeholders to evaluate the earnings generated from core business operations without the impact of non-cash expenses like depreciation. By focusing solely on earnings before these deductions, EBITDA provides a clearer picture of a company's ability to generate cash flow from its operational activities. Therefore, understanding that depreciation does not factor into EBITDA highlights the primary reason why this option accurately describes their relationship.