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

EBITDA = Earnings Before Interest Taxes Depreciation and Amortization EBIT = EBITDA less Depreciation and Amortization If D&A > 0, then EBIT =/= EBITDA. Why would it matter where the D&A is on the income statement? In any case, EBIT & EBITDA are all non-GAAP terms so do whatever the heck you want...

Depreciation in COGS

HY.r.e.a.m

King Kong

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.

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Authored by: Certified Private Equity Professional - 2nd Year AnalystCertified Private Equity Pro

mrb87

Almost Human

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