EBITDA: Corporate Finance Lessons from Tony Soprano

In this tutorial, you'll learn what EBITDA means, how to calculate it, and why criticism of EBITDA is both deserved and also a bit misplaced.
Files & Resources:
breakingintowallstreet.com/kb/accounting/ebitda/
Table of Contents:
0:00 Introduction
4:56 Part 1: How to Calculate EBITDA in More Detail
7:06 Part 2: What Does EBITDA Mean?
8:41 Part 3: Is EBITDA Close to Cash Flow from Operations?
10:16 Part 4: The Pros and Cons of EBITDA
11:11 Recap and Summary

[@financialmodeling]

Files & Resources: breakingintowallstreet.com/kb/accounting/ebitda/ Table of Contents: 0:00 Introduction 4:56 Part 1: How to Calculate EBITDA in More Detail 7:06 Part 2: What Does EBITDA Mean? 8:41 Part 3: Is EBITDA Close to Cash Flow from Operations? 10:16 Part 4: The Pros and Cons of EBITDA 11:11 Recap and Summary

[@laurenthynes8467]

Was waiting for you guys to use this! Great content!

[@financialmodeling]

Thanks for watching!

[@phamhongvann]

Thank you for the video :)

[@financialmodeling]

Thanks for watching!

[@antoniegriezmann6073]

Hey thank you, this is really interesting and good for first-time learner in finance. Just a simple question, is there any non-cash item do you think in cost of goods sold or operating expense that we should add back except the restructuring charges on the video? Do we need to look at notes of financial statement carefully?

[@financialmodeling]

To clarify, you add back *non-recurring items* not non-cash items. The only exception to this is D&A itself, but that's because it's part of the definition of the metric. And there may be other non-recurring items within COGS or Operating Expenses - we simply didn't take the time to look through the filings to check. You normally do not do this for quick screens/analyses, but may do so if it's for an important client, a deal that's about to close, or something similar.

[@Dan-fx1sg]

Thank you, this is very helpful. Just a quick question, in the Best Buy OCF, why do they add back the resturucting expense? Is it becuse the restructuring expense is non-cash? Thanks

[@financialmodeling]

Yes, restructuring is non-cash for Best Buy in that period, so it likely represents some type of accrual item to pay for an upcoming cash outflow associated with the restructuring.

[@palilingallensius3303]

Thank you, this is absolutely amazing. But just a bit question on calculating EBITDA. Some say that we need to include non-operating income/expense on our EBIT. How do you deal with this?

[@financialmodeling]

That seems wrong because the whole point of EBIT and EBITDA is that they reflect only the core business. Adding non-operating income/expenses would be a big deviation from that. There may be some contexts in which it makes sense (e.g., a retailer including income from financing for customer purchases), but these are specialized cases and not that common in real life.

[@10xleverage_nyc]

Wish I could see you get interviewed for an IB analyst role haha

[@financialmodeling]

Yeah, just go back ~20 years...