EBITDA or earnings before interest, depreciation, taxes and amortization.💪
EBITDA is a good way for us to compare multiple companies without looking at their tax situations or interest charges.👀🔥
On the other hand it can be very misleading due to depreciation and amortization📈. Company directors can easily manipulate how they want depreciation and amortization to be reflected. This could make the company look better off than it is😳. 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).🔥