What is EBITDA?๐Ÿ˜€

EBITDA or earnings before interest, depreciation, taxes and amortization.๐Ÿ’ช

EBITDA is a good way for us to compare multiple companies without looking at their tax situations or interest charges.๐Ÿ‘€๐Ÿ”ฅ

On the other hand it can be very misleading due to depreciation and amortization๐Ÿ“ˆ. Company directors can easily manipulate how they want depreciation and amortization to be reflected. This could make the company look better off than it is๐Ÿ˜ณ. By not taking into account a companies interest and tax charges we are potentially overlooking major expenses which give a true indication of a firm's financial health.

EBITDA is sometimes seen as an accounting trick to make a company appear that it is earning more money than it really is (since it essentially ignores the interest, taxes, depreciation, and amortization the company must pay).๐Ÿ”ฅ

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