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Its 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
by graemep 7mo ago
Its 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 7mo 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 7mo 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.