#theNACtheRATKINS #sarahSTYLE BLOOM Where You’re Planted #ebitdaSTYLE not #church.STYLE https://nac-usa.org/

Democratic Rep. Jamie Raskin failed to properly report a massive stock holding and payout for his wife — a Biden banking regulator nominee

https://www.msn.com/en-us/news/politics/democratic-rep-jamie-raskin-failed-to-properly-report-a-massive-stock-holding-and-payout-for-his-wife-a-biden-banking-regulator-nominee/ar-AATr1PT

https://en.wikipedia.org/wiki/Jamie_Raskin

JAMIE RATKIN F’in’ over Marylanders since 2007 – He’s all about the money, just like his little Mrs. #SUBVERTORS.extraordinaire

https://en.wikipedia.org/wiki/Sarah_Bloom_Raskin

The Mrs. Do you think she may be helping the ‘churches’ hide money? Helping the 501c3’s keep their THIEVERY status up to PAR? Writin’ off masks? Do you think she knows what EBITDA positive is? Do you think she is REQUIRED to know? Do you?

https://www.investopedia.com/terms/e/ebitda.asp

EBITDA – Earnings Before Interest, Taxes, Depreciation, and Amortization

By 

ADAM HAYES

Updated February 04, 2021

Reviewed by 

JANET BERRY-JOHNSON

Table of Contents

What Is Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)?

EBITDA, or earnings before interest, taxes, depreciation, and amortization, is a measure of a company’s overall financial performance and is used as an alternative to net income in some circumstances. EBITDA, however, can be misleading because it strips out the cost of capital investments like property, plant, and equipment.

https://fef7fb1edd01ef42df4078e5d8084c61.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

This metric also excludes expenses associated with debt by adding back interest expense and taxes to earnings. Nonetheless, it is a more precise measure of corporate performance since it is able to show earnings before the influence of accounting and financial deductions.

https://fef7fb1edd01ef42df4078e5d8084c61.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

Simply put, EBITDA is a measure of profitability. While there is no legal requirement for companies to disclose their EBITDA, according to the U.S. generally accepted accounting principles (GAAP), it can be worked out and reported using the information found in a company’s financial statements.

https://fef7fb1edd01ef42df4078e5d8084c61.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

The earnings, tax, and interest figures are found on the income statement, while the depreciation and amortization figures are normally found in the notes to operating profit or on the cash flow statement. The usual shortcut to calculate EBITDA is to start with operating profit, also called earnings before interest and tax (EBIT) then add back depreciation and amortization.

KEY TAKEAWAYS

  • EBITDA is a widely used metric of corporate profitability
  • EBITDA can be used to compare companies against each other and industry averages.
  • EBITDA is a good measure of core profit trends because it eliminates some extraneous factors and provides a more accurate comparison between companies.
  • EBITDA can be used as a shortcut to estimate the cash flow available to pay the debt of long-term assets.

https://imasdk.googleapis.com/js/core/bridge3.496.0_en.html#goog_1591740839

0 seconds of 25 secondsVolume 75%

0:25

EBITDA

https://fef7fb1edd01ef42df4078e5d8084c61.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

EBITDA Formula and Calculation

EBITDA is calculated in a straightforward manner, with information that is easily found on a company’s income statement and balance sheet. There are two formulas used to calculate EBITDA, one that uses operating income and the other net income. The two EBITDA calculations are:

https://fef7fb1edd01ef42df4078e5d8084c61.safeframe.googlesyndication.com/safeframe/1-0-38/html/container.html

EBITDA = Net Income + Taxes + Interest Expense + Depreciation & Amortization

and

Understanding EBITDA

https://toronto.ctvnews.ca/brampton-community-grieving-three-young-brothers-killed-in-fatal-house-fire-last-week-1.5760453

EBITDA is essentially net income (or earnings) with interest, taxes, depreciation, and amortization added back. EBITDA can be used to analyze and compare profitability among companies and industries, as it eliminates the effects of financing and capital expenditures. EBITDA is often used in valuation ratios and can be compared to enterprise value and revenue.

Interest expenses and (to a lesser extent) interest income are added back to net income, which neutralizes the cost of debt and the effect interest payments have on taxes. Income taxes are also added back to net income, which does not always increase EBITDA if the company has a net loss. Companies tend to spotlight their EBITDA performance when they do not have very impressive (or even positive) net income. It’s not always a telltale sign of malicious market trickery, but it can sometimes be used to distract investors from the lack of real profitability.

Companies use depreciation and amortization accounts to expense the cost of property, plants, and equipment, or capital investments. Amortization is often used to expense the cost of software development or other intellectual property. This is one of the reasons that early-stage technology and research companies feature EBITDA when communicating with investors and analysts.

Management teams will argue that using EBITDA gives a better picture of profit growth trends when the expense accounts associated with capital are excluded. While there is nothing necessarily misleading about using EBITDA as a growth metric, it can sometimes overshadow a company’s actual financial performance and risks.

EBITDA and Leveraged Buyouts

EBITDA first came to prominence in the mid-1980s as leveraged buyout investors examined distressed companies that needed financial restructuring. They used EBITDA to calculate quickly whether these companies could pay back the interest on these financed deals.

Leveraged buyout bankers promoted EBITDA as a tool to determine whether a company could service its debt in the short term. These bankers claimed that looking at the company’s EBITDA-to-interest coverage ratio would give investors a sense of whether a company could meet the heavier interest payments it would face after restructuring. For instance, bankers might argue that a company with EBITDA of $5 million and interest charges of $2.5 million had interest coverage of two—more than enough to pay off debt.

EBITDA was a popular metric in the 1980s to measure a company’s ability to service the debt used in a leveraged buyout (LBO). Using a limited measure of profits before a company has become fully leveraged in an LBO is appropriate. EBITDA was popularized further during the “dot com” bubble when companies had very expensive assets and debt loads that were obscuring what analysts and managers felt were legitimate growth numbers.

The Drawbacks of EBITDA

EBITDA does not fall under generally accepted accounting principles (GAAP) as a measure of financial performance. Because EBITDA is a “non-GAAP” measure, its calculation can vary from one company to the next. It is not uncommon for companies to emphasize EBITDA over net income because it is more flexible and can distract from other problem areas in the financial statements.

An important red flag for investors to watch is when a company starts to report EBITDA prominently when it hasn’t done so in the past. This can happen when companies have borrowed heavily or are experiencing rising capital and development costs. In this circumstance, EBITDA can serve as a distraction for investors and may be misleading.

Ignores Costs of Assets

A common misconception is that EBITDA represents cash earnings. However, unlike free cash flow, EBITDA ignores the cost of assets. One of the most common criticisms of EBITDA is that it assumes that profitability is a function of sales and operations alone – almost as if the assets and financing the company needs to survive were a gift.

Ignores Working Capital

EBITDA also leaves out the cash required to fund working capital and the replacement of old equipment. For example, a company may be able to sell a product for a profit, but what did it use to acquire the inventory needed to fill its sales channels? In the case of a software company, EBITDA does not recognize the expense of developing the current software versions or upcoming products.

Varying Starting Points

While subtracting interest payments, tax charges, depreciation, and amortization from earnings may seem simple enough, different companies use different earnings figures as the starting point for EBITDA. In other words, EBITDA is susceptible to the earnings accounting games found on the income statement. Even if we account for the distortions that result from interest, taxation, depreciation, and amortization, the earnings figure in EBITDA is still unreliable.

Obscures Company Valuation

Worst of all, EBITDA can make a company look less expensive than it really is. When analysts look at stock price multiples of EBITDA rather than bottom-line earnings, they produce lower multiples.

Consider the historical example of wireless telecom operator Sprint Nextel. April 1, 2006, the stock was trading at 7.3 times its forecast EBITDA. That might sound like a low multiple, but it doesn’t mean the company is a bargain. As a multiple of forecast operating profits, Sprint Nextel traded at a much higher 20 times. The company traded at 48 times its estimated net income. Investors need to consider other price multiples besides EBITDA when assessing a company’s value.

EBITDA vs. EBT and EBIT

EBIT (earnings before interest and taxes) is a company’s net income before income tax expense and interest expense have been deducted. EBIT is used to analyze the performance of a company’s core operations without tax expenses and the costs of the capital structure influencing profit. The following formula is used to calculate EBIT: 

\textit{EBIT} = \text{Net Income} + \text{Interest Expense} + \text{Tax Expense}EBIT=Net Income+Interest Expense+Tax Expense

Since net income includes the deductions of interest expense and tax expense, they need to be added back into net income to calculate EBIT. EBIT is often referred to as operating income since they both exclude taxes and interest expenses in their calculations. However, there are times when operating income can differ from EBIT.

Earnings before tax (EBT) reflects how much of an operating profit has been realized before accounting for taxes, while EBIT excludes both taxes and interest payments. EBT is calculated by taking net income and adding taxes back in to calculate a company’s profit.

By removing tax liabilities, investors can use EBT to evaluate a firm’s operating performance after eliminating a variable outside of its control. In the United States, this is most useful for comparing companies that might have different state taxes or federal taxes. EBT and EBIT are similar to each other and are both variations of EBITDA.

Since depreciation is not captured in EBITDA, it can lead to profit distortions for companies with a sizable amount of fixed assets and subsequently substantial depreciation expenses. The larger the depreciation expense, the more it will boost EBITDA.

EBITDA vs. Operating Cash Flow

Operating cash flow is a better measure of how much cash a company is generating because it adds non-cash charges (depreciation and amortization) back to net income and includes the changes in working capital that also use or provide cash (such as changes in receivables, payables, and inventories).

These working capital factors are the key to determining how much cash a company is generating. If investors do not include changes in working capital in their analysis and rely solely on EBITDA, they will miss clues that indicate whether a company is struggling with cash flow because it’s not collecting on its receivables.

Examples of EBITDA

A retail company generates $100 million in revenue and incurs $40 million in production cost and $20 million in operating expenses. Depreciation and amortization expenses total $10 million, yielding an operating profit of $30 million. Interest expense is $5 million, which equals earnings before taxes of $25 million. With a 20% tax rate, net income equals $20 million after $5 million in taxes are subtracted from pre-tax income. If depreciation, amortization, interest, and taxes are added back to net income, EBITDA equals $40 million.

Net Income$20,000,000
Depreciation Amortization+$10,000,000
Interest Expense+$5,000,000
Taxes+$5,000,000
EBITDA$40,000,000

Many investors use EBITDA to make comparisons between companies with different capital structures or tax jurisdictions. Assuming that two companies are both profitable on an EBITDA basis, a comparison like this could help investors identify a company that is growing more quickly from a product sales perspective.

For example, imagine two companies with different capital structures but a similar business. Company A has a current EBITDA of $20,000,000 and Company B has EBITDA of $17,500,000. An analyst is evaluating both firms to determine which has the most attractive value.

From the information presented so far, it makes sense to assume that Company A should be trading at a higher total value than Company B. However, once the operational expenses of depreciation and amortization are added back in, along with interest expense and taxes, the relationship between the two companies is more clear.

 Company ACompany B
EBITDA$20,000,000$17,500,000
Depreciation Amortization-$2,000,000-$2,500,000
Interest Expense-$8,000,000-$5,000,000
Taxes-$2,000,000-$2,000,000
Net Income$8,000,000$8,000,000

In this example, both companies have the same net income largely because Company B has a smaller interest expense account. There are a few possible conclusions that can help the analyst dig a little deeper into the true value of these two companies:

  • Is it possible that Company B could borrow more and increase both EBITDA and net income? If the company is underutilizing its ability to borrow, this could be a source of potential growth and value.
  • If both companies have the same amount of debt, perhaps Company A has a lower credit rating and must pay a higher interest rate. This may indicate additional risk compared to Company B and a lower value.
  • Based on the amount of depreciation and amortization, Company B is generating less EBITDA with more assets than Company A. This could indicate an inefficient management team and a problem for Company B’s valuation.

How Do You Calculate EBITDA?

You can calculate EBITDA using the information from a company’s income statement, cash flow statement, and balance sheet. The formula is as follows:

EBITDA = Net Income + Interest + Taxes + Depreciation + Amortization

What Is a Good EBITDA?

EBITDA is a measure of a company’s financial performance and profitability, so relatively high EBITDA is clearly better than lower EBITDA. Companies of different sizes in different sectors and industries vary widely in their financial performance. Therefore, the best way to determine whether a company’s EBITDA is “good” is to compare its number with that of its peers—companies of similar size in the same industry and sector.

What Is Amortization in EBITDA?

As it relates to EBITDA, amortization is an accounting technique used to periodically lower the book value of intangible assets over a set period of time. Amortization is reported on a company’s financial statements. Examples of intangible assets include intellectual property such as patents or trademarks, or goodwill derived from past acquisitions.

thievery

 noun

Save Word

To save this word, you’ll need to log in.

Log In 

thiev·​ery | \ ˈthēv-rē  , ˈthē-və- \

plural thieveries

Definition of thievery

the act or practice or an instance of stealing THEFT

SynonymsExample SentencesLearn More About thievery

Synonyms for thievery

Synonyms

Visit the Thesaurus for More 

Examples of thievery in a Sentence

 a case of suspected thievery a man who has a history of petty thievery and narcotics peddling

https://www.merriam-webster.com/dictionary/thievery

https://toronto.ctvnews.ca/brampton-community-grieving-three-young-brothers-killed-in-fatal-house-fire-last-week-1.5760453

A week after a deadly townhouse fire claimed the lives of three young brothers in Brampton, a grieving community is rallying together to support the family and their neighbours who have also been displaced by the blaze.

Donations are being collected at the New Apostolic Church just steps away from the townhouse complex where the deadly fire occurred near Torbram Road and Clark Boulevard on Jan. 20.

https://nac-usa.org/ Do you think they calculate EBITDA for their foreign FOR=PROFIT (not FOR-PROPHET) entity? Do you?

%d bloggers like this: