What is E B I T D A | E B I T D A margin & E B I T D A multiple | Advantages & Disadvantages

From this video you will learn What is E B I T D A or Earnings Before Interest, Taxes, Depreciation and Amortization explained, Understanding of E B I T D A margin, E B I T D A multiple, Advantages & Disadvantages of E B I T D A in stock market for beginners in english.

E B I T D A:
E B I T D A stands for Earnings Before Interest, Taxes, Depreciation and Amortization.
It is a metric used to evaluate a company’s operating performance. The in-depth definition of the key terms in E B I T D A are:
- Earnings: The net profit or net income of an organization
- Before: Excludes certain factors from the equation.
Since these are already subtracted from net profits, the E B I T D A calculation adds them back in.
- Taxes: The expenses to a business caused by tax rates imposed by their city, state, and country as a whole.
- Depreciation: A non-cash expense referring to the gradual reduction in the value of the company’s assets.
- Amortization: A non-cash expense referring to the cost of intangible (non-balance sheet) assets over time.

E B I T D A formulae:
E B I T D A = Net Income + Interest + Taxes + D + A
where: D = Depreciation, A= Amortization
E B I T D A = Operating Profit + DE+ AE
where: DE= Depreciation expense, AE= Amortization expense.

Advantages of using E B I T D A:
- In theory, it is similar to Price to earnings ratio. Unlike the PE ratio, it is neutral to capital structure. It reduces the risk of variables that are affected by capital investment and other financing variables.
- E B I T D A represents the value of the company’s cash flow generated by ongoing operations.

Disadvantages of using E B I T D A:
- E B I T D A excludes debt expenses of a company by adding the taxes and interest back to the earnings. This can be used by the companies in misleading the masking the failures and financial shortcomings.
- Using E B I T D A may not allow companies to secure loans. Loans are calculated on a company’s actual financial performance.

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Видео What is E B I T D A | E B I T D A margin & E B I T D A multiple | Advantages & Disadvantages канала SimplyInfo