Hey gurus,
Why do people in Wall Street look at EBITDA all the time when this figure doesn't include a lot of deductions? This figure just looks at the income from operation, but what if the deduction takes out a large chunk of the operating time? Can you say that the company is still doing good?
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bc the idea is if it is a one-time charge, it doesn't reflect ongoing operations of the business and you should exclude it
It is an easy way to compare companies across industries.
It's also a decent measure of the profit/cash generation capability of a business regardless of capital structure since you exclude interest from debt, D&A from capitalized expenses/assets, and taxes (which are based on legal structure).
Thanks big guys.
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