If you have capex, you do not record that expense on that income that year.
You instead, deduct it slowly over it's useful life (ex: do not expense this year, but may deduct 10% of its value over 10 years)
Lets say I look at a company's EBITDA over 10 years. That means, at no point, is that company's capex ever recorded, right?
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Capex is not an operating expense
Correct. CapEx doesn't appear in the income statement anywhere. Depreciation is a proxy for it, but that's not in EBITDA obviously ("before...depreciation...").
So basically after 10 years, looking at EBITA, a capex-heavy company's capex expenses (depreciation) would be ignored.
So is EBIT better for looking at capex heavy businesses?
I'm not following you, and don't understand your fixation with 10 years.
EBITDA-capex (vs. ebita) is a better cashflow metric for capital intensive companies, especially if that's "maintenance" vs. "growth" capex.
Thanks for the help. Just wanted to really clarify that point still.
Year doesn't matter, was just picking an arbitrary number.
I just want to make sure I understand - that if you look at a company's EBITDA any effect of capex is null, right? Since depreciation is the expense account for capex. EBITDA takes no capex (i.e depreciation) into account at all.
So a capex intensive business with have a much seemingly higher profitability than if EBIT was used.
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