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EBITDA is bullshit if depreciation is an expected, significant part of your business. For many vc-backed companies, it isn't, but for any company with major phy

by jcrben 5y ago

EBITDA is bullshit if depreciation is an expected, significant part of your business. For many vc-backed companies, it isn't, but for any company with major physical capex, it very much is a real expense. There's also the whole inconsistency with capitalizing software expenses... if you want to be aggressive about accounting, you certainly can. But of course the biggest part of this story is stock-based comp, which is very much a real expense.

vineyardmike 5y ago
True, but (1) uber owns nothing (mostly), and (2) depreciation doesn't really affect real-world profit/loss as a "regular person" expects. Its mostly an accounting tool (that often lets companies hide money). If you eg. build a building, you can depreciate ~10% a year in many cases, but that doesn't really mean you're losing/gaining money. Eg. a residential building can depreciate at 5% a year. If you owned and rented a house in SF, its not decreasing in value by 5% a year, probably even considering cost of repairs/upgrades grows as a building ages (the purpose of this metric). So including a (-5% of building) depreciation amount on the earnings of said rental property makes little sense when evaluating if its "profitable".
- marsdepinski 5y ago
  Uber owns a huge software platform. Checkout how much it costs them to maintain it.
  - youngtaff 5y ago
    That's one of the funny things about accounting… In some countries development costs can be captalised, and the depreciated over future years (when that software is earning revenue) Sort of ignores the fact that software is always a depreciating asset from the time you first start writing it
  - vineyardmike 5y ago
    > Checkout how much it costs them to maintain it. Thats Operational Expenditure (OpEx) not Capital Expenditure (CapEx) usually. Unless they own servers, or bought licenses to software, etc.

by jcrben 5y ago

vineyardmike 5y ago

True, but (1) uber owns nothing (mostly), and (2) depreciation doesn't really affect real-world profit/loss as a "regular person" expects. Its mostly an accounting tool (that often lets companies hide money). If you eg. build a building, you can depreciate ~10% a year in many cases, but that doesn't really mean you're losing/gaining money. Eg. a residential building can depreciate at 5% a year. If you owned and rented a house in SF, its not decreasing in value by 5% a year, probably even considering cost of repairs/upgrades grows as a building ages (the purpose of this metric). So including a (-5% of building) depreciation amount on the earnings of said rental property makes little sense when evaluating if its "profitable".

marsdepinski 5y ago
Uber owns a huge software platform. Checkout how much it costs them to maintain it.
- youngtaff 5y ago
  That's one of the funny things about accounting… In some countries development costs can be captalised, and the depreciated over future years (when that software is earning revenue) Sort of ignores the fact that software is always a depreciating asset from the time you first start writing it
- vineyardmike 5y ago
  > Checkout how much it costs them to maintain it. Thats Operational Expenditure (OpEx) not Capital Expenditure (CapEx) usually. Unless they own servers, or bought licenses to software, etc.