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"EBITDA serves as a standard profit metric across companies and industries" No it doesn't! EBITDA is not standardized metric. It's not defined under GAAP or I
by rahimnathwani 6mo ago
"EBITDA serves as a standard profit metric across companies and industries"
No it doesn't!
EBITDA is not standardized metric. It's not defined under GAAP or IFRS. Companies calculate it differently, often adjusting it in ways that make their results look better.
If you want a 'standard profit metric', use net income. That one is actually defined under GAAP and IFRS.
- graemep 6mo agoIts not standard, but its widely used because it is more comparable between companies as it removes the impact of interest (and therefore capital structure) and depreciation (which can reflect different histories). The standardised measures can be manipulated too.
- rahimnathwani 6mo agoSure, EBITDA is useful for comparing operating performance between companies in a single industry, where capital structures and asset bases are broadly similar. But the article applies it across industries, where those assumptions break down. This makes no sense. The article called it a 'standard profit metric'. It is a metric, but it doesn't measure profit (as it ignores capitalized costs) and it isn't standard.
- graemep 6mo ago> Sure, EBITDA is useful for comparing operating performance between companies in a single industry, where capital structures and asset bases are broadly similar. The whole point of EBITDA is, as I said, to eliminate the effect of capital structures. EBITDA margin is not meaningful between dissimilar industries. I am not sure what would be best. Some sort of return on investment measure. I think calling it a profit measure is fine.