Other Income included in EBITDA?
Hi,
I want to know if other income is included or excluded when calculating EBITDA. I was given a formula by a colleague for a sort of Adjusted EBITDA:
Adjusted EBITDA = EBITDA + Total Income (including other income) - Net Sales. But this doesn't make any sense to me. He wants to know the EBITDA margin only as it pertains to the company's core operations, but the above formula would increase EBITDA by the difference between total income and net sales. Wouldn't you want to subtract this difference from EBITDA instead (EBTIDA - [Total Income - Net Sales])? and then take your new "adjusted" EBITDA and divide it by net sales?
I'm confused by this formula...don't use it. Adjusted EBITDA = Net Income + Taxes + Interest + Depreciation + Amortization + EBITDA Adjustments. Many times, other income / expense items are non-recurring in nature, so they'd be adjusted out and not included in Adjusted EBITDA. It's really just looking at EBITDA from normal company operations.
Thank you!
Depends if "other income" is a recurring item for the company. That said, I'd probably exclude it in most cases as it usually pertains to non recurring activity such as scrap sales, etc.
Subtract net sales? Am I the only one just taking crazy pills or is that not right?
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