Week 4_Discussion Thread

Week 4_Discussion Thread - Week 4: Depreciation,...

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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 pla in wh at is me ant by EB IT DA an d wh y co mp ani es ar e re po rtin g thi s nu mb er. b. W hy ha s the W orl dC om ba nkr
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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. Amortization
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This note was uploaded on 11/23/2009 for the course ACCOUNTING ACC304 taught by Professor Mahon during the Fall '09 term at Strayer.

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Week 4_Discussion Thread - Week 4: Depreciation,...

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