2 businesses with the same EBITDA, 100. Business A, its EBIT is 80 and its DA is 20. Business B, its EBIT is 20 & its DA is 80. A high DA indicates that a business is intensive in the use of capital to stay the same or grow. The ratio of EBITDA to EBIT is the depreciation factor:
Brillant! Thank you. We sometimes play a game when watching CNBC to count how many times we hear EBITDA. Sometimes it is used as a verb and a noun in the same sentence. Okay maybe not, but EBITDA is thrown around like you'd need to be in the cool kids group to know what it means.
Good quick framework to explain EBIDTA @BrianFeroldi, thanks.
Planina also seeks to enrich the dialogue for everyone’s benefit, that the EBIDTA metric is not without its shortcomings. Follow @planinacapital where these peculiarities are explained.