🚫 Why EBITDA Doesn’t Matter 🚫

1. What is EBITDA?
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization
💡 In simple terms: It shows what the company earns before subtracting costs like interest, taxes, depreciation, and amortization.
📊 Formula: EBITDA = Net Income + Taxes + Interest + Depreciation + Amortization

2. What is EBITDA Margin?
💹 Formula: EBITDA Margin = Revenue / EBITDA × 100
🔍 Insight: A higher EBITDA margin means a larger percentage of revenue is converted into EBITDA.
📉 Lowest EBITDA Margin: Biotechnology at -166.3%
📈 Highest EBITDA Margin: Stock Exchanges at 48.3%

3. What is Adjusted EBITDA?
🔧 Formula: Adjusted EBITDA = EBITDA + Adjustments for non-recurring, non-cash, or non-operational items
🚨 Beware: Companies use Adjusted EBITDA to exclude one-time, irregular items, often inflating figures to impress and potentially mislead.

4. Free Cash Flow (FCF) vs. EBITDA
💵 Formula: FCF = Operating Cash Flow − Capital Expenditures
🔍 Key Difference: FCF is a more reliable metric than EBITDA, showing the actual cash available after all expenses. It indicates how much cash is available for shareholders, debt repayment, or reinvestment.

5. EBITDA is Misleading
🗣️ Charlie Munger: “I think that, every time you saw the word EBITDA earnings, you should substitute the word ‘bullshit’ earnings. People who use EBITDA are either trying to con you or they’re conning themselves.”

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