The Bull

Thursday 19

October, 2017 5:20 AM



EBITDA

foto
What does it mean?

EBITDA = Revenue - Expenses (excluding taxes, interest, depreciation and amortisation)

 

.


foto
TheBull says...

It’s often said that the accounting term EBITDA shouldn’t be trusted as a gauge of the financial health of a company. When management emphasise EBITDA rather than net income, you have to ask the question – are they hiding something?

Last week we looked at EBIT, or earnings before interest and tax. This week we take depreciation and amortisation out of the equation as well, coming up with EBITDA - earnings before interest, taxes, depreciation, and amortisation.

Many criticise EBITDA because it doesn’t take into consideration important business costs and can therefore overstate a company’s profitability. EBITDA doesn’t include cash payments to cover interest on debt, taxes, depreciation on equipment and amortisation. Critics of EBITDA argue that it’s a prettied up earnings figure that makes a company look healthier than it really is.

It’s often said that the accounting term EBITDA shouldn’t be trusted as a gauge of the financial health of a company. When management emphasise EBITDA rather than net income, you have to ask the question – are they hiding something?

Last week we looked at EBIT, or earnings before interest and tax. This week we take depreciation and amortisation out of the equation as well, coming up with EBITDA - earnings before interest, taxes, depreciation, and amortisation.

Many criticise EBITDA because it doesn’t take into consideration important business costs and can therefore overstate a company’s profitability. EBITDA doesn’t include cash payments to cover interest on debt, taxes, depreciation on equipment and amortisation. Critics of EBITDA argue that it’s a prettied up earnings figure that makes a company look healthier than it really is. 

.


Live prices, powered by IG
Powered by

PLEASE SUPPORT OUR SPONSORS, AUSTRALIA'S LEADING BROKERS:



© Copyright The Compare Group Pty Ltd. All rights reserved.