Warren buffet on EBITDA !What is ADJUSTED EBITDA ?
In its quarterly reports, Uber uses ‘EBITDA’ heavily. Its rival, Lyft also uses EBITDA similarly. In fact, almost all new tech companies stress on EBITDA. Several non-tech companies too. And then you have people like Charlie Munger and Warren Buffett who say, “I think that every time you see the word EBITDA, you should substitute the word bullsh*t earnings”. What’s the deal with EBITDA? Why do so many companies use it? And why does Warren Buffett not like it? EBITDA In basic terms, it’s like your salary – the one that the company says it is paying you. Your ‘CTC’. It does not account for your taxes or EMIs or bills. The full form of this is Earnings Before Interest, Taxes, Depreciation, and Amortisation. Let’s go a bit deeper. Interest: the company would have borrowed money. This is the amount it needs to pay back. Taxes: the company owes the government some taxes. Depreciation: the company owns assets. These would differ from industry to industry. But the assets lose value ove...