3 ms·
"(Note there are reasons to use EBITDA" What are those reasons? I've taken several accounting and "business from legal pov" classes in my life, and still I don
by roel_v 7y ago
"(Note there are reasons to use EBITDA"
What are those reasons? I've taken several accounting and "business from legal pov" classes in my life, and still I don't really understand why it's such a prominent metric. Like, either you use proper profit, or you use turnover - EBITDA has always seemed such an artificial inbetween to me.
- nappy-doo 7y agoEBITDA is a metric that's meaningful if you owned the whole business from the prospective of a larger company swallowing a smaller. For example, EBITDA says, "ok, if I were to price this whole business, and my cost of capital didn't change, I can use this metric to compare it to rewards of ownership of another." It allows you to "divide out" the accounting details of a business. (eg, I can borrow cheaper, or, I can use economies of scale to decrease some amortization cost, etc.) It is largely bogus when discussing the overall metrics of a business, or using it in isolation.
- roel_v 7y agoThank you, that clears it up for me.