Creative person working in corporate world. Can someone please help me understand:
\- EBITDA – what does this show compared to revenue??
\- What “below the line” and “above the line” means (like what is this line we’re talking about??”
my creative self thanks you in advance
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EBITDA, which stands for Earnings Before Interest, Taxes, Depreciation, and Amortization.
Earnings are the money left after selling and deducting many of the costs associated with generating those sales.
EBITDA separates a company’s performance from how it pays for its assets (and its tax jurisdiction). It focuses on a company’s core operations to evaluate its performance and allows for comparing companies within the same industry, independent of their asset financing methods.
There are also claims that EBITDA correlates with a company’s cash flow (cash-money generated). Why this is important is that finance defines a company’s value as the value today of the cash flows it will generate in the future.
There are two key lines in income statements. The gross profit (GP) line above which costs associated with producing a product or service are captured, and an EBIT line below GP line where additional operating expenses e.g. management and administration costs and (in this case) depreciation and amortization (recognizing the cost of acquiring assets)
Oof… I keep stumbling into more finance terms, I hope I’m helping and not hindering your understanding.
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