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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– Earnings before interest, taxes, depreciation and amortization. It is a metric to show profitability of the company independent of any “financing” stuff that they’ve done. A company that is able to get better terms on a loan, for example, will show better bottom line profitability, but that doesn’t mean that their core business is stronger. EBITDA strips all that away and talks just about the core business.
– Above-the-line costs are the regularly occurring costs a business accrues in order to make the product or provide the service they offer. The “line” in this scenario represents gross profit. Organizations subtract above-the-line costs from their revenue to determine gross profit. Below-the-line costs are non-repeated or unexpected costs that don’t affect the profit-and-loss account of a company. Below-the-line costs are essential to calculating net profit. To calculate net profit, organizations may subtract below-the-line costs from the gross profit or “line.” Below-the-line costs often provide a more accurate representation of the financial health of a company because inflation doesn’t influence below-the-line costs. Below-the-line costs most often include operating costs, interest and tax.
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