3 ms·
Can you elaborate? How are these things connected? Why wouldn't EBITDA be a useful financial framing for "growth" companies while the country was on the gold st
by AlexandrB 4y ago
Can you elaborate? How are these things connected? Why wouldn't EBITDA be a useful financial framing for "growth" companies while the country was on the gold standard? Just because it happened around the same time, doesn't mean there's any causal relationship here.
- hammock 4y agoWall Street newly accepting EBITDA (cash flows) over DTI or net income, as told in the link above about the cable utility, is logical in an environment of a rapidly expanding money supply driven by unencumbered Federal Reserve. In the loose/free money era, financing cash flows with more and more debt is incentivized and in some respects the default mode of operation. Growth over value. Alternately, when the credit environment tightens, you see moves back to value and away from growth
- clairity 4y agonote that EBITDA isn't directly equivalent to cash flows, and can be wildly different depending on how creative the accounting is. EBIT/EBITDA can be useful is some comparative valuation exercises as an idealized cash flow substitute (especially when comparing companies or time periods under differing tax regimes), but it's not actual cash in minus cash out, as the term "cash flow" implies.