Week 4: Depreciation, Impairments, and Depletion - Threaded Discussion
Discussion
An article by Martin Peers and Robin Sidel, entitled “Days May Be Numbered for EBITDA's Role,”
appeared in the July 5, 2002, issue of the
Wall Street Journal.
Instructions
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Read the article and answer the following questions.
a.
Ex
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IT
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ANSWERS:
1.
Explain what is meant by EBITDA and why companies are reporting this number.
EBITDA means
Earnings Before Interest, Taxes, Depreciation and Amortization.
It’s a way to
express a company’s earnings (the same as net income or profits or the “bottom line”) in a
given period.
But it is a number that is expressed before the company takes out recurring
charges or costs like taxes, interest paid on debt, the loss of value of assets.
Companies use
EBITDA especially when the number is positive while others may be negative.
It is a way to try
and show a consistent number if a new company is growing fast and spending huge amounts
of money so it has no hopes of turning a profit.
That is why it became popular number during
the late 1990s.
Additionally, here are some descriptions about EBITDA:
Taxes and Interest
are removed because most companies wanted to substitute their own
tax-rate calculations and the financing costs they expected under a new capital structure.
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- Fall '09
- MAHON
- Accounting, Depreciation, Impairment, Generally Accepted Accounting Principles, Earnings before Interest, Non-GAAP financial Measures, Holtzman
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