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EBITDA: Meaning, Formula, and History
Source: investopedia.com
Article summary:
1. EBITDA is an alternate measure of profitability to net income, which strips out non-cash expenses and taxes.
2. EBITDA is not a metric recognized under GAAP and has been criticized for overstating profitability.
3. EBITDA can be calculated from financial statements and is often used in valuation ratios such as EV/EBITDA.
Article analysis:
The article provides a comprehensive overview of the concept of EBITDA, including its meaning, formula, and history. The article is well-written and provides clear explanations of the concepts discussed. It also includes examples to illustrate how EBITDA works in practice.
However, there are some potential biases in the article that should be noted. For example, the article does not provide any counterarguments to the criticisms of EBITDA raised by Warren Buffett and other investors. Additionally, while the article mentions that some companies report adjusted EBITDA figures excluding additional costs such as stock-based compensation, it does not discuss any potential risks associated with this practice or why it might be misleading for investors.
In conclusion, while this article provides a good overview of EBITDA, it could benefit from more balanced coverage of both sides of the debate surrounding its use as a measure of profitability.