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EBITDA Explained by Nicolas Boucher What is EBITDA, and what is your take on this metric? 📚 Download his finance cheat sheet here: https://lnkd.in/eCYCKDBN EBITDA stands for: • Earnings • Before • Interest • Taxes • Depreciation • Amortization It's a financial metric that shows how much money a company makes before accounting for non-operational expenses like interest and taxes and non-cash expenses like depreciation and amortization. Why is EBITDA important for Businesses? EBITDA is important because it gives businesses an idea of how much money they generate from their operations. This is useful for investors and lenders who want to know how profitable a company is. Knowing how much money a company is making is like a scorecard. How is EBITDA calculated? To calculate EBITDA, start with a company's revenue and subtract its cost of goods sold. Then, you subtract its operating expenses (like salaries and rent). Another way to calculate it: Net Income + Interest Expense + Taxes + Depreciation + Amortization EBITDA vs. Net Income EBITDA: In EBITDA, you don’t consider these expenses: Depreciation, Taxes, and Interest. Net Income: Net income is what remains as profit after depreciation, interest, and taxes are taken into account. 👉 What is your take on EBITDA? ————— 🧑💼 I'm a partner at Business Partnering Institute 🆘 Need immediate help in your finance team, call us! 🤝 We help increase the influence of your finance team 🔔 To see more content, hit the bell on my profile 🧑🎓 Enroll in our LinkedIn course: https://bit.ly/4a5fB9l 📻 #FinanceMaster podcast: https://bit.ly/3NLSt73 📺 Follow us on YouTube: https://bit.ly/4bSBut6 📢 Join our WhatsApp channel: https://bit.ly/3WWGOrc 📄 Check out all our templates and cheat sheets here: https://lnkd.in/eC_zuCU4
Why not just use operating cash flow? A much better metric and much more difficult to massage. EBITDA can vary on things like purchasing a building or renting the same building.
Fantastic explanation, I'm sure many in my network will benefit from reading. I'm no expert but one unusual aspect of EBITDA is that if I'm not mistaken (correct me if I'm wrong!) it's not a standardised metric under GAAP or IFRS? So companies have flexibility in how they calculate and present EBITDA, which can lead to significant variations and potential manipulation?
What are the standard EBITDAs in different sectors? I'm interested at least for the professional services sector.
FCE anyday or DCF
I Love to see this shared as it’s a concept not clear for everybody!
Ah, EBITDA - the financial world's way of saying 'Let's focus on the good stuff and worry about the rest later!' Thanks for breaking it down, Anders!
EBITDA can be used as a crude proxy for but is not a direct measure of cash flow (which is important). Not a wise idea to evaluate a company's health using EBITDA in isolation as it can be misleading.
Principal at Pacific Management Consulting Group, Restaurant Analyst and Management Consultant
3wI will register my critique of this topic paper AGAIN. EBITDA is a misleading metric, good only as a mere subtotal profit before MANY other charges and expenses such as debt service and CAPEX. It is used in valuations and high level M&A analysis. EBITDA is not even close to cash Flow as it misses so many expenses and cash oulĺays. In my business, chain restaurants, EBITDA is a fast way to calculate "appx. profit" if the corporation might not know CAPEX or debt or have more data. McDonald's refers to its $MCD franchisee EBITDA as cash Flow, when it is NOT cash flow. Ian Borden.