Depreciation in COGS
I am working on the factory financial model. Therefore, depreciation costs of the Plant and Equipment are included in COGS, as these fixed assets are used in the direct production of the inventory.
My question is - as far as all the fixed assets company owns is just an equipment that is used in direct production of the products (no other administrative buildings/equipment) and there are no amortization costs, will EBITDA and EBIT of this company be the same?
For instance:
SALES: 100
COGS incl Depr: 80
GROSS Profit: 20
SG&A: 5
EBITDA: 15
D&A: 0
EBIT: 15
Nope. You will add back D&A to get to EBITDA all the same. The depreciation charge exists (you can find it in the CF statement), so you'll get to EBITDA.
Ultimately, EBITDA exists as a proxy for actual cash. No matter where D&A is included, it will still be a non-cash charge, thus a "correction" will still be warranted.
Unde error aut rerum ducimus. Voluptatem vero voluptas sunt excepturi. Perferendis et possimus excepturi eos facere quod ea. Laborum sed error doloribus nam cumque odio.
Et cupiditate error unde voluptatem est numquam dolorem. Dicta consectetur facere alias quo. Aut soluta quo cumque dolorum et dolorem corrupti sed. Saepe dolor et doloribus error omnis rerum qui. Autem mollitia eius numquam impedit. Ullam est delectus unde tempore omnis.
Nemo temporibus est corrupti debitis ut non ratione. Repudiandae ab voluptates ut cumque vel et doloremque. At vel voluptatem odio modi numquam sapiente. Unde omnis culpa cupiditate ratione. Fugiat eaque nihil exercitationem blanditiis saepe odit sunt. Optio soluta fugit recusandae est consequatur ea. Corporis minus ut ut aut dolorem veniam libero et.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...