Financial Doc question

[Inky29]

I'm looking over a breakdown of annual earnings and the last line just says EBIDTA. I know what it stands for but i'm more curious as to the significance. I assume a higher EBIDTA means more money or profitable a company is?

 

[Marshal Jim Duncan]

I'm looking over a breakdown of annual earnings and the last line just says EBIDTA. I know what it stands for but i'm more curious as to the significance. I assume a higher EBIDTA means more money or profitable a company is?

EBITDA is considered non-GAAP, but is a measure of (pre-tax) cash flow. Non-cash expense (and sometimes revenue) items are added back to pre-tax net income. The idea is it gives both a truer cash flow reading of financial performance and removes the vagaries of tax policy from the bottom line for comparison's sake.

EDIT: I left out the interest portion of the discussion. Adding back the interest gives a truer indication of result so operations, absent financing differences and also gives a reading on how much cash flow is available relative to debt service requirements