EBIT and EBITDA: What are they, and why are they important?

[@TheFinanceStoryteller]

Lots of exciting and helpful new videos coming up! Be sure to click the like button, subscribe and turn on notifications to ensure you don't miss anything. Learn more by watching my EBITDA example video kzbin.info/www/bejne/bZbCZ6R7pJaaqKs and my EBITDA calculation video kzbin.info/www/bejne/m3mXlqtrpsSdZ9k and my EBITA video kzbin.info/www/bejne/pHrQoWhnr76Wr5Y

[@cait8573]

From the bottom of my heart...thank you. I will never get over the shock of paying an absurd amount of money each semester only to have my instructor give me a paper and essentially say "ok figure it out!" No lecture or demonstration or discussion whatsoever. I have subscribed!

[@TheFinanceStoryteller]

Thank you, Cait! That is a beautiful piece of feedback. :-) I am happy to hear you are taking control of your learning journey by adding other "sources" of information. I have a few more videos relating to EBIT-EBITA-EBITDA including calculations and more real life examples in this playlist: kzbin.info/www/bejne/bZbCZ6R7pJaaqKs

[@TheFinanceStoryteller]

.... and please spread the word to friends and colleagues! 🙂

[@cait8573]

@@TheFinanceStoryteller i shared you in my class Group Me! Thank you and have a great day!

[@TheFinanceStoryteller]

@@cait8573 Thank you so much!!! Very nice. :-)

[@TheDaniCorner]

Seriously this has been the best, most efficient how-to for ebit/da I've ever come across. A+++++++++

[@TheFinanceStoryteller]

Thank you very much for the compliment, Dani! Glad to hear I could help. :-) Look forward to hearing your comments on the other videos in my Finance Storyteller series, you might like the one on depreciation, and the one on "non-GAAP versus GAAP" as well.

[@TheFinanceStoryteller]

I have a few more EBITDA examples in this playlist: kzbin.info/www/bejne/hGe9mHyMdraYjrM

[@MrShanks008]

Tis is exactly what I wanted. I am an engineer and dont want to get into too much details, just wanted to glance at a balance sheet and understand it enough to buy a stock as an Investor. Thatz it. Thank you :-)

[@fak119]

Good. Then give me some examples of „Amortization“.

[@Goedendag28]

I’m just here since Vought’s EBITA margins dropped and I was wondering how Homelander was going to handle it.

[@DogBellz]

For someone that absolutely hates this stuff, but needs to understand it, this was amazing. Great job!

[@TheFinanceStoryteller]

Thank you for the compliment! Nicely put! :-)

[@hangv001]

thank you!!! I'm a visual person and I also don't like long winding excel examples. This is perfect to my taste, short, sweet and simple. Hallelujah!

[@TheFinanceStoryteller]

You're welcome! Thank you for the kind words. :-)

[@OsaroOyegun]

Exactly, I'm very visual also so this was perfect and concise!

[@fares643]

I'm a student in France, i love finance because it is the subject of my studies, i saw a plenty of videos talking and dealing with financial topics, but honestly i found out that your content is the highest and improved one, which discusses all financial issues in a simplified manner. Good work sir.

[@TheFinanceStoryteller]

Merci beaucoup! Agree, let's keep the discussion of financial concepts as close to the real world as we can.

[@fares643]

@@TheFinanceStoryteller Thank you so much sir, i'm fond of your videos, have my warmest regards.

[@TheFinanceStoryteller]

@@fares643 Let me know if you think any topics are missing! Planning to make 2 or 3 videos per month, so always looking out for new stories to add.

[@fares643]

@@TheFinanceStoryteller It is a pleasure to watch your videos sir, and obviously what you post is always significant. If you could sir, i want you to discuss about business mergers and share valuation, I really love this topic and I look forward to watching a video about it. It would be a pleasure if you do it sir because you are the one of kind who can explain finance in a simplified way.

[@TheFinanceStoryteller]

Have a look at my video on mergers and acquisitions kzbin.info/www/bejne/eHKpnpqGjdufgJo (I am very happy with that one, took a good amount of work to put together) and the one on WACC (and its severe limitations) kzbin.info/www/bejne/Z4CQdZWqi9qYg9k

[@buckjohnson6202]

Great tutorial! Really helped break down the accounting verbiage, and explained what to look for and why, when assessing a company.

[@TheFinanceStoryteller]

Thanks for the kind words! Glad you enjoyed the video. A few more examples available in this playlist: kzbin.info/www/bejne/bZbCZ6R7pJaaqKs&pp=gAQBiAQB

[@buckjohnson6202]

@@TheFinanceStoryteller Another good tutorial, thanks again!

[@Tlhakxza]

THANK YOU for this meaningful video,I don't know anything about finance,I have been working for my company for 10 years now and they've sent us what I assume to be a shortened version of Annual Report in which Growth has been experienced. Our CEO mentioned EBITDA in the newsletter,because this is new to me I quickly googled what this EBITDA means and your channel was the first in line,needless to say how impressed I am by the simple form of explanation. I may not be a financial/accounting guru but I got a rough sketch to what's happening in the business.After watching this video I think I'm going to school to learn how to read Balance Sheet and Income Statement Account. Thank you once again.

[@TheFinanceStoryteller]

You're welcome! And thank you for taking the time to write your kind note. So far, I have almost 9 hours' worth of finance training material in video format on my channel, including explanation of terminology and walk-throughs of balance sheet, income statement and cash flow statement of various companies. Hope they can help you to better understand the business!

[@soyan.o2844]

Thank you for this video! Its not that hard to understand but it gets confusing when you don't get the whole picture. Thanks to you I have a much better understanding about the connections and the importance of EBIT and EBITDA. It helped a lot!

[@TheFinanceStoryteller]

You're welcome, Soyan! Yep, it's all about seeing how it fits together....

[@Friderikas]

Simple yet great explanation on EBIT and EBITDA without the need to decipher accounting textbooks 📚🙏✌️

[@TheFinanceStoryteller]

Exactly! :-) Thank you very much. Please tell your colleagues and friends about it! ;-)

[@ohromujici]

Thank you. I didn't understand these concepts until I watched your video. Great explanation.

[@TheFinanceStoryteller]

Great to hear! Some more discussion of the concepts, and examples of how to calculate them, in this playlist: kzbin.info/www/bejne/bZbCZ6R7pJaaqKs

[@viktorakawisevik1305]

I dabble with loan agreements for a living and ofyen get confused when the accountants and finance directors speak. Yours was very straightforward - I found your explanation very simple and effective. Well done.

[@TheFinanceStoryteller]

Thank you very much for the kind words! Hope you find some more videos on my channel that help clarify the "finance language". :-)

[@ronharris3411]

First time viewer and instant subscriber. Thank you and keep up the good work 👍🏽

[@TheFinanceStoryteller]

Great to hear that, Ron! Welcome! I have made a few more videos on EBIT-EBITA-EBITDA (how to calculate, why these metrics are used) that could be helpful for you: kzbin.info/www/bejne/bZbCZ6R7pJaaqKs

[@vladimirputin7407]

The most underrated youtuber. This guy should get more subs ! I subs !

[@TheFinanceStoryteller]

Haha! Thank you. Please spread the word.

[@ivanmeno]

I think you are the most underrated president!

[@wgmentis9906]

the best finance videos i have found in youtube so far!!! man you are great!!!

[@TheFinanceStoryteller]

Thank you! Happy to hear that. :-) Please spread the word to friends and colleagues.

[@TheFinanceStoryteller]

Should companies focus more on EBITDA as one of their main financial metrics? Yes/no? Why? Let me know by commenting below.

[@ronharris3411]

As you said, it depends on the industry. I came across this video as I researched prospective investments. The last line in this video made me consciously aware of something I already knew, but didn't heavily consider. Certain industries/companies are asset/credit intensive and others are capital/cash intensive. That's how you determine which metric to apply in evaluating.

[@snehalsahoo5400]

You are an absolute genius to be honest you made it so easy to understand even though I am a finance student I didn't know the concept much and the college didn't help much your videos are seriously great... I am gonna watch each and every one of them.. Thank you so much.

[@TheFinanceStoryteller]

Thank you very much for the compliments, it's nice to hear that. :-) Enjoy the videos, please subscribe to the channel, and tell your fellow students. Here's the link to my playlist with EBIT-EBITA-EBITDA videos, I worked out some more examples and calculations: kzbin.info/www/bejne/bZbCZ6R7pJaaqKs

[@carringtondemuyakor5630]

Great video. Thought me all I needed to know about EBIT and EBITDA in just a few mins. Great stuff.👍

[@TheFinanceStoryteller]

Thank you!! Glad you enjoyed it. I have a few more videos on my channel with related topics that may help you.

[@ricardocolyersanchez3534]

Couldn’t have explained it any better, loved it

[@TheFinanceStoryteller]

Thank you, Ricardo! I have some more examples around EBIT-EBITA-EBITDA in this playlist: kzbin.info/www/bejne/bZbCZ6R7pJaaqKs

[@joeabad5908]

Thank you for the short but direct and informative video..

[@TheFinanceStoryteller]

Happy to help, Joe! I followed up this video with some more explanation and examples: kzbin.info/www/bejne/bZbCZ6R7pJaaqKs

[@kennethbeard5553]

The concepts are not complex but usually very poorly explained. This is a really good explanation with good graphics and valuable contextual information.

[@TheFinanceStoryteller]

Thank you very much, Kenneth! This was my very first KZbin video two years ago, have added more than 70 videos since then (including some more on calculating EBITDA). Enjoy, and please spread the word! ;-)

[@ibrahimalbaz2595]

that 1:53 explanation cleared my head 100%

[@TheFinanceStoryteller]

Nice to hear that! More discussion of the concepts as well as examples in this playlist: kzbin.info/www/bejne/bZbCZ6R7pJaaqKs&pp=gAQBiAQB

[@OsaroOyegun]

OMG, the best explanation ever! I'm hooked. Thank you so much! This channel is Like A*****

[@TheFinanceStoryteller]

Thank you. :-) The "EBIT and EBITDA" video was my first ever when starting the Finance Storyteller channel. Today, I am close to having 100 videos, including some more examples around EBITDA. Enjoy, and please spread the word.

[@munxunyang]

This has been well-explained! I really appreciate it and keep up the good work.

[@TheFinanceStoryteller]

Thank you! :-)

[@begood7563]

Thank you . It's easy to understand. Even some words are too difficult for me to catch as my mother language is not English. But in general this video is very helpful. Thank you so much.

[@TheFinanceStoryteller]

Great to hear that! Thank you. Maybe it helps to also watch the follow-up video EBIT-EBITA-EBITDA kzbin.info/www/bejne/pHrQoWhnr76Wr5Y or the one called EBITDA example kzbin.info/www/bejne/bZbCZ6R7pJaaqKs for an even better understanding.

[@merriemec5309]

It is becoming more clear for me thank you !!

[@TheFinanceStoryteller]

Great to hear that, Merrieme! Some more examples in this playlist: kzbin.info/www/bejne/bZbCZ6R7pJaaqKs

[@scholarlyreader383]

Very clear and educational. Thank you professor.

[@TheFinanceStoryteller]

You're welcome!

[@aliciawilliams5170]

This was very informative and simple. It was very helpful to understand what I thought would be a complicated theory of understanding. Thank you. It is greatly appreciated.

[@TheFinanceStoryteller]

Thank you very much for the kind words, Alicia! Finance is often not so difficult as it seems, although some finance people (for job security purposes) pretend it is really really complicated. ;-) I keep learning more myself about these cryptic topics when researching and making my videos, here are some additional insights on EBIT-EBITA-EBITDA: kzbin.info/www/bejne/pHrQoWhnr76Wr5Y

[@texasaggie2522]

Nicely presented for easy understanding

[@laurenkang3848]

Wow! This helped me understand my course better :) Thank you

[@TheFinanceStoryteller]

Great to hear that! I have a few more videos on the topic of EBT-EBIT-EBITA-EBITDA, both examples as well as how to calculate. See playlist: kzbin.info/www/bejne/hGe9mHyMdraYjrM

[@NavaneethaKrishnanK1984]

Really appreciate your videos. Always used when I want to get my fundamentals right

[@TheFinanceStoryteller]

Thank you very much, Navaneetha! I appreciate the compliment.

[@GaneshKumarganeshkmr16]

Thank you for the detailed explanation. I have one clarification: 1. @1.53 - Revenue - Cost of Sales = Gross Profit. Again, Gross Profit - SG&A - R&D = EBITDA. Since we have already considered Cost of Sales to arrive at Gross Profit, what is the significance of S in SG&A? Isn't Cost of Sales = Selling expenses?

[@TheFinanceStoryteller]

Hello! I am very happy that you ask this question, as this is a common misunderstanding. Cost Of Sales is also called Cost Of Goods Sold (if the company sells products) kzbin.info/www/bejne/oHa4n3ablJ58Y9U or Cost Of Services Sold (if the company sells services). Example: if you run a furniture store, then you might be delivering and invoicing a chair to your customer (1 unit sold times selling price). The Cost Of Sales, or Cost Of Goods Sold (1 unit sold times cost per unit) consists of the materials that went into the chair, the labor for the workers assembling it, and any machine cost in production. In SG&A, the S is for selling expenses, which would be the brochures that the company makes to promote its products, the salaries of the sales people in the store that interact with customers, etc. Hope that helps!

[@shawn576]

Great explanation of EBITDA. Ignoring depreciation always seemed like the dumbest thing in the world, but it would make sense to ignore that if items currently depreciating are not reflective of what will replace them in the future (old expensive system to be replaced with cheaper system at end of life). Not a perfect metric but not a useless metric either.

[@TheFinanceStoryteller]

Agree with you, Shawn! EBITDA can be a useful proxy for cash flow from operating activities, as depreciation is a non-cash expense. Here is another example of calculating EBITDA with real world numbers: kzbin.info/www/bejne/bZbCZ6R7pJaaqKs

[@jie-yanbei6710]

Thank you. The presentation is informational and straightforward.

[@TheFinanceStoryteller]

You're welcome! :-)

[@TheFinanceStoryteller]

I have made two more short videos with examples of EBITDA calculations, hope you like them: kzbin.info/www/bejne/bZbCZ6R7pJaaqKs kzbin.info/www/bejne/m3mXlqtrpsSdZ9k

[@alexgehales]

Simple and to the point. Good Video.

[@TheFinanceStoryteller]

Nice to hear that. Thank you, Alex!

[@rohanpalande8308]

This video was very helpful and informative! I was in a major crunch, sigh, with a business project, ugh. This really helped me figure it out :) Best of wishes for your channel and a prosperous life to you! Thanks again.

[@TheFinanceStoryteller]

Thank you, Rohan! Please spread the word. :-) I have made a few more EBITDA related videos, most recent one on the EBIT to EBITDA "gap" for the DJIA30 companies: kzbin.info/www/bejne/boTZi2Z_dtqDgpo

[@gibbgibbs3691]

Thanks for the explaination. Sometimes Ialways asked mydself am i stupid or what as I am a technical driven more than finance. I don't seems to get throught the meaning of EBITDA. And after watching your video, it is as simple as ABC. THANKS!!!

[@TheFinanceStoryteller]

Wonderful to hear that! Thank you for commenting. Please subscribe to the channel.

[@maheshs4056]

This single video has helped me understand EBITDA better compared to other videos and articles. Thank you. Question regarding the formula at 2:00: When a company earns money, they usually have to first pay taxes. So doesn't it make sense to minus the (Taxes, Interest) variables from the Gross Profit, before R&D and SGA? The remaining money would be the Net Income, which can then be spent on R&D, right?

[@TheFinanceStoryteller]

Hello Mahesh! Thank you for the kind words. Those are very good questions. A lame answer to them would be "that's just the way we have agreed to do it". 😉 An attempt at a better answer is: it makes logical sense (to me at least) to take revenue minus the costs to produce the product or services (COGS), which gets you to the Gross Margin subtotal, minus the cost of the support (SG&A) and R&D functions, which gets you to the Operating Margin subtotal. As the term suggests, Operating Margin, indicates the profitability generated by the operational activities, see kzbin.info/www/bejne/jHSwe619ZqaUjqM You subsequently deduct interest expenses (driven by the financing structure) and corporate income taxes (driven by the countries you are located in and their tax rates/regimes) to get to Net Income. Interest expense and corporate income taxes are non-operational charges. For a more detailed walk-through of the income statement, see my analysis of Microsoft: kzbin.info/www/bejne/fqKQZWeGfcx0n7c

[@marcovasconcelos5746]

Technically speaking in valuing an enterprise the only 2 metrics that matter are free cashflow and risk. EBITDA is a good proxy for OCF but needs adjustment for investment (capex + wc), Depreciation and amortization only figure in P&L for tax deduction.

[@jamesperry3837]

*Wow! This is super! I so am inspired to watch more and more of ur videos.* _Tysm._

[@TheFinanceStoryteller]

You're welcome! :-) Per my latest count, I have 135 videos (13 hours) on the Finance Storyteller as per today, so please go ahead and enjoy them. And tell all your friends/colleagues. ;-)

[@abdul-mumindambatahidu5080]

A very educative video for me!

[@TheFinanceStoryteller]

Glad it was helpful!

[@thongdinh5169]

so touching for an excellent video

[@TheFinanceStoryteller]

Glad you enjoyed it

[@RaspreetSinghJaggi]

Yes, it was nice.. thanks for your uploads

[@TheFinanceStoryteller]

Glad you enjoyed it, Raspreet! Please subscribe to the channel. Here's the link to some more real life examples of EBITDA: kzbin.info/www/bejne/bZbCZ6R7pJaaqKs

[@TiA-tx5yp]

Quick and easy. Thanks for the review!

[@TheFinanceStoryteller]

You're welcome! I have some more examples for you around EBIT-EBITA-EBITDA on my channel.

[@bharathm763]

Nice .. Way of presentation is superb 👏 Thank you 🥳✌

[@TheFinanceStoryteller]

Thanks a lot 😊

[@ivanmeno]

This was very explanatory! I finally get it, thanks!

[@TheFinanceStoryteller]

Thank you, Ivan! Wonderful to hear that.

[@cindydavid4550]

SOO Helpful! Thank you!

[@TheFinanceStoryteller]

Great to hear that! Here's the link to some more examples: kzbin.info/www/bejne/bZbCZ6R7pJaaqKs

[@johnoliver4664]

Thanks for making this simple to understand 😊

[@TheFinanceStoryteller]

You're very welcome!

[@JAGANMOHANMANTHENA]

Thank you very much for a great explanation.

[@TheFinanceStoryteller]

You're welcome!

[@dpdp006]

Thank You Sir for explaining it clearly . I would like your comments on understanding CAPEX intensive Biz like semiconductors , Trucking etc

[@TheFinanceStoryteller]

You're welcome! Some capital intensive businesses like telecom are high margin but low asset turnover (if you do a Return On Assets analysis): kzbin.info/www/bejne/aJubk5mIbbCkgJI

[@MaiaDreams]

Wonderful video, thank you! I assume this is related just to the USA tax system right?

[@TheFinanceStoryteller]

Hi Victoria! EBIT and EBITDA are generic non-GAAP metrics. The T stands for corporate income taxes. Any corporate income tax is excluded, whether it is US tax or taxes in other countries. Multinational companies could have difference in net income due to the countries they operate in and the respective taxes rates. EBIT and EBITDA exclude that effect.

[@robertosandoval6335]

I loved the explanation.

[@TheFinanceStoryteller]

Nice to hear that! More examples and discussion of the EBIT-EBITA-EBITDA concepts in this playlist: kzbin.info/www/bejne/bZbCZ6R7pJaaqKs&pp=gAQBiAQB

[@PradeepMenon666]

Another excellent video.

[@TheFinanceStoryteller]

Thank you, Pradeep! That was the very first one I made, which has subsequently been followed up by many more EBIT-EBITA-EBITDA examples and examplanations: kzbin.info/www/bejne/bZbCZ6R7pJaaqKs

[@gwgtaylor]

Absolutely loved it. Thank you!

[@TheFinanceStoryteller]

Great to hear that, Gerald! This was the very first video ever on my channel, since then I have made a few more. 😉 Here's the link to a playlist with more EBIT-EBITA-EBITDA explanations, examples, calculations, etc. kzbin.info/www/bejne/bZbCZ6R7pJaaqKs

[@alysonboyer4931]

I see where this would be useful in our trucking business. And even though it is somewhat important in a counseling field. I think too many corporations and owners get so focused on #'s and not on the quality of their services. So how can one keeping in mind the EBIT/EBITDA and the quality of service delivery where neither one of these are being compromised. The corporation I work for is all about numbers. And for me it is about the focus and the needs of the client that I am serving and that will eventually take care of the EBIT/EBITDA,

[@TheFinanceStoryteller]

Very good point, Alyson! Thanks for your comment. I agree with you that having a balanced/holistic view of a company's performance (financial performance as well as employee and customer satisfaction) is very important. In order to convince top management to invest/spend at your company, you probably have to walk them through the linkage between quality of service delivery which impacts customer satisfaction which in turn impacts revenue and margin. Unfortunately, this is probably not a straightforward 1-to-1 equation, but I hope you can show the "big picture" with a good amount of data... let the numbers talk!

[@catm4993]

Love your videos 🙌🏻 thank you!

[@TheFinanceStoryteller]

You're welcome! I am make 1 or 2 new videos per week, so there are plenty of new videos to watch!

[@SolomFoz]

Thank you so much for this profound explanation!

[@TheFinanceStoryteller]

Glad it was helpful! This was the very first video I made when starting the channel. The follow-up video on EBIT-EBITA-EBITDA provides even more context: kzbin.info/www/bejne/pHrQoWhnr76Wr5Y

[@zahidshaikh2988]

Hi I want to start to learn finance from scratch Can you please let me know where to start like which playlist first ?

[@TheFinanceStoryteller]

Welcome! You are in for an interesting journey! Here's where I think you can start: kzbin.info/www/bejne/n4Oak2WEn8x0hZo&pp=gAQBiAQB

[@datvideozv9361]

If a company has deposit interest earnings, how would you take this into account when calculating ebitda, is it supposed to be removed from ebitda so ebitda would be a smaller figure?

[@TheFinanceStoryteller]

Yes. In that case, EBIT would be lower than EBT. See also my video on EBIT vs EBITA vs EBITDA where I go "letter by letter" kzbin.info/www/bejne/pHrQoWhnr76Wr5Y

[@datvideozv9361]

@@TheFinanceStoryteller thank you!

[@TheFinanceStoryteller]

@@datvideozv9361 Happy to help!

[@diegocastro9724]

Thank you for making this!

[@TheFinanceStoryteller]

You're welcome, Diego!

[@TheAyyarfire]

Thank You Sean Connery :)

[@majorevangelism]

Homelander needs to watch this video.

[@PhilipPieterse1]

Good explanation clearly delivered

[@TheFinanceStoryteller]

Thanks, Philip. Greetings back from Philip! :-)

[@drlucy4470]

Fantaistic - made so so simple! Thank you

[@TheFinanceStoryteller]

You're welcome, Lucy! Thank you for watching and commenting! I have a few more examples on my channel around EBIT-EBITA-EBITDA if you want to dive in deeper.

[@preetsandhu2844]

Very good Video and nice explaination....can you make one special video explaining EBITDA for finance company

[@Astridah_M]

Thank you this was very helpful

[@TheFinanceStoryteller]

I'm so glad, Astridah! More examples and context in these related videos: kzbin.info/www/bejne/bZbCZ6R7pJaaqKs

[@nerycarrasco3862]

Thanks for the video !

[@TheFinanceStoryteller]

My pleasure!

[@samialmulla4376]

Hi again, EBITDA = Gross Profit - R&D - S,G&A. For this equation to work shouldn't D&A not be included in calculating Gross Profit & SG&A? I think in financial statments D&A is included in the calculations for Gross Profit & SG&A.

[@TheFinanceStoryteller]

Hi Sami! There can be differences in the way a company presents its income statement. For example, telecom company Verizon (where depreciation and amortization is a huge number), splits depreciation and amortization out as a separate line item. On the other hand, a company such as Apple does not specify depreciation and amortization separately in the income statement, but D&A is inside other line items. If a lot of the D&A relates to manufacturing sites and equipment, then that part of the D&A would be in COGS. More information on this in my follow-up video on the EBITDA calculation: kzbin.info/www/bejne/m3mXlqtrpsSdZ9k

[@lilmoney7825]

Very good. I will reference this video and your channel in the future.

[@TheFinanceStoryteller]

Thanks, Tammie! Great to hear you enjoyed it. I have several videos on related topics on my channel. Enjoy!

[@cristianv7228]

Very helpful! Thank you very much, got a sub😃👍

[@TheFinanceStoryteller]

Thank you, Cristian! And welcome!!! :-) I have made a few more videos around EBIT-EBITA-EBITDA, of which this one is my favorite: kzbin.info/www/bejne/pHrQoWhnr76Wr5Y Enjoy!

[@cristianv7228]

The Finance Storyteller Wow thankyou! I will definitely check it out👍 have a great day

[@TheFinanceStoryteller]

You too, Cristian! I hope you will find many more finance videos on my channel that are helpful to you. If you think any topics are missing, then please let me know!

[@oceaniccoffee6405]

Thanks for the presentation. I have a question regarding EBITDA: Would you define EBITDA as a company's performance indicator, so EBITDA equals Operative Profit (Revenue, minus Cost Of Sales, minus S,G&A, minus R&D)?? Thanks.

[@TheFinanceStoryteller]

Hi! Operating Income is closer to EBIT, not EBITDA.

[@oceaniccoffee6405]

@@TheFinanceStoryteller Operating Income is closer to EBIT, or is the EBIT??

[@TheFinanceStoryteller]

@@oceaniccoffee6405 Closer to, but I'd have to dive into it before I could name the differences.

[@enerxiazelementa]

why you sound very serious but your illustration and your profile look friendly and chill

[@TheFinanceStoryteller]

Agree! This was the very first KZbin video I made 7 years ago, and I was looking for the right "mix" on how to make the story both entertaining as well as informative. Have learned a lot since then, but still go back and forth between "lighter" and more serious approach to the videos depending on the topic and my mood.

[@enerxiazelementa]

@@TheFinanceStoryteller hha, it makes this video even more interesting and you did amazing even on the first time tho. thank you!

[@TheFinanceStoryteller]

Made some follow-up videos as well with more narrative and examples on EBIT and EBITDA: kzbin.info/www/bejne/bZbCZ6R7pJaaqKs&pp=gAQBiAQB

[@enerxiazelementa]

@@TheFinanceStoryteller haha I've watched that one too. Insightful, thank you!

[@FRESHENDEAVOUR]

have you explained how to extract EBIAT anywhere? (sorry I haven't searched your channel in completeness)

[@TheFinanceStoryteller]

Yes! Take a look at the videos in this playlist kzbin.info/www/bejne/bZbCZ6R7pJaaqKs

[@raffaa-kano4129]

Good video, simple and clear. Good example with Maersk Company . Can I suggest to carry out similar analysis for well known companies like APPLE, TESLA, FORD, GM or AMAZON FACEBOOK, FRESNILLO? If you have not done the video this could be an idea, so we can appreciate the difference between EBITA/DA of companies in different sectors and technologies. thanks again great video

[@TheFinanceStoryteller]

Thank you for the suggestion, Rafael! I will add it to my list of videos to make. In the meantime, I have a video for you covering Gross Margin and Operating Margin for Apple and Amazon: kzbin.info/www/bejne/jHSwe619ZqaUjqM

[@TheFinanceStoryteller]

EBITDA versus EBIT comparison for the DJIA30: kzbin.info/www/bejne/boTZi2Z_dtqDgpo

[@huchmoz]

Could anyone please englighten me on whether the interest in the EBIT or EBITDA refers to interest expenses only or both the interest expenses & interest income (i.e. net of interest) ???

[@TheFinanceStoryteller]

As far as I know, both interest expenses & interest income would be excluded. In the past, the vast majority of companies had far more (or even exclusively) interest expense, as many companies were highly financially leveraged (with lots of debt on the balance sheet). Nowadays, with tech giants like Apple, Microsoft or Alphabet Inc (Google), having a net interest income is more common due to the vast cash and marketable securities positions these companies have on the assets side of their balance sheet. Here's an example for Apple: kzbin.info/www/bejne/a5O6oJempreGj7c

[@huchmoz]

Great...👍👍👍...a million thanks to you!!!

[@gulbanoomussani3496]

Perfectly understandable

[@TheFinanceStoryteller]

Thank you, Gulbanoo!

[@imaniameniel1590]

Very helpful Sir

[@TheFinanceStoryteller]

Glad to hear that, Imani!

[@FunnyAsian00]

3:09 but how would anyone know how long the truck will last? they may think it's going to last 5 yrs but it may last 10 yrs. what happens then!

[@TheFinanceStoryteller]

That's why companies usually create asset categories like heavy machinery, light machinery, vehicles, etc. and build an audit trail for the useful economic life of each of these. What are the specifications that the manufacturer of the equipment provided, what was the experience with similar assets used in the past, etc.

[@FunnyAsian00]

@@TheFinanceStoryteller ahhh thank you!!!

[@FunnyAsian00]

Thats the best truck I ever seen!!!

[@TheFinanceStoryteller]

Thank you, John!

[@geddamurisatish]

subscribed to channel after listening to the first 50 secs

[@TheFinanceStoryteller]

Fantastic! Welcome! Hope you will spend many more hours watching the videos. Enjoy!

[@meybeck]

this is very useful !!! I enjoyed and learned a lot !!!! Thenk you very much man!!!

[@TheFinanceStoryteller]

Thank you for the kind words! Glad you liked it. I have made two follow-up videos on calculating EBITDA from financial statements, maybe these are useful for you as well: kzbin.info/www/bejne/m3mXlqtrpsSdZ9k kzbin.info/www/bejne/bZbCZ6R7pJaaqKs

[@kushsmart5828]

How is EBITDA greater than EBIT at 1:49 ?

[@TheFinanceStoryteller]

If you make such a claim, please specify what you think the mistake is, and what you think the correct answer is.

[@kushsmart5828]

Ok so EBITDA - depreciation and Amortization is not EBIT. actually EBITDA + depreciation and Amortization is EBIT which is correct interpretation you said it all opposite.

[@TheFinanceStoryteller]

@@kushsmart5828 Disagree, I stated it correctly. EBITDA is a higher number than EBIT. Here's a numerical example, working the way up the income statement from net income. If you add back corporate income tax expense of 20 to net income of 80, you get to Earnings Before Taxes of 100. If you add back interest expense of 10 to EBT of 100, you get to Earnings Before Interest and Taxes of 110. If you add back amortization expense of 15 to EBIT of 110, you get to Earnings Before Interest, Taxes and Amortization of 125. If you add back depreciation of 25 to EBITA of 125, you get to Earnings Before Interest, Taxes, Depreciation and Amortization of 150. Therefore, EBIT + DA = EBITDA, and EBIT = EBITDA - DA. See also: kzbin.info/www/bejne/pHrQoWhnr76Wr5Y

[@kushsmart5828]

@@TheFinanceStoryteller Great explanation I'm still learning and new to the world of investing. corporatefinanceinstitute.com/resources/knowledge/finance/ebit-vs-ebitda/ This website is interactive and easy to understand who may have same doubt as me. I now understand why Warren is against EBITDA. I should not have directly pointed a mistake without knowing so I'll change the title thankyou!

[@EwaR92]

The video could've included even more practical examples in the context of income statement. As a beginner stock investor I'm still not sure about if or why should I check EBIDTA and what conclusions can I take away from it. :/

[@TheFinanceStoryteller]

Thank you for the feedback! I have some more videos on EBITDA (how to calculate, comparison for DJIA30 companies) available in a playlist: kzbin.info/www/bejne/bZbCZ6R7pJaaqKs Also, the "how to analyze an income statement" case study (Walmart) might help you as well: kzbin.info/www/bejne/oKDZfIqXit2Xo7c

[@Steve_Takes]

yea but we need the laymans explanation for example, when a trader says 10X Ebitda or 20X Ebitda....what the heck do they mean? The explanation of Ebit/Da was perfect though. it's just understanding how the Traders slang it out.

[@ntcuong01ct1]

Dear Friends, Could you write the formula of EBITDA breakeven?. Thanks.

[@TheFinanceStoryteller]

See my response on the same question that you posted on the "break even analysis" video.

[@samialmulla4376]

Is EBITDA the same as operating income? If it is the same thing then if the company had other operating expenses in addition to (research & development) & (Sales, General & Admin) shouldn't we also subrract the other operating expenses from gross profit to get EBITDA?

[@TheFinanceStoryteller]

Hi Sami! Operating Income is similar to EBIT. R&D and SG&A seem to capture all costs that are between Gross Profit and EBITDA. This is based on the income statement by "function". The alternative way to "slice and dice" the same data is to look at the income statement "by natural account" (salaries, travel and living, transportation, utilities), which is very often used internally in companies, but not published externally.

[@samialmulla4376]

@@TheFinanceStoryteller I see thanks.

[@samialmulla4376]

@@TheFinanceStoryteller Just to make sure I understood you: EBITDA = GP - R&D - S,G&A but if we subtract all operating expences then it will be equal to EBIT so EBIT = GP - R&D - S,G&A - Non Requrring Items - Other Operating Items. If that is true then doesn't EBITDA = EBIT + Non Requrring Items + Other Operating Items and won't that also mean D&A = Non Requrring Items + Other Operating Items?

[@TheFinanceStoryteller]

Hi Sami. You are going in the wrong direction. Three suggestions to put things in perspective: my video explaining EBIT vs EBITA vs EBITDA to get a better feeling for why companies would choose to report any of these non-GAAP metrics kzbin.info/www/bejne/pHrQoWhnr76Wr5Y Explanation of depreciation (definition, calculation) kzbin.info/www/bejne/bIS8aaZnlLR4qNE Explanation of amortization kzbin.info/www/bejne/mZqaY5SViN95mbM

[@afridiansari1021]

Earning before interest and tax and depreciation, so interest and tax is included or not because it says earning before.. also, how it shows only operating value if depreciation is also calculated and tax also calculated.??

[@TheFinanceStoryteller]

Hello Afridi. EBITDA is earnings before all 4 of the following items: ITDA. In my video on EBIT-EBITA-EBITDA I have laid it out more clearly with a numerical example kzbin.info/www/bejne/pHrQoWhnr76Wr5Y

[@YiyeTinkers]

Thanks for the simple explanation!

[@TheFinanceStoryteller]

Thank you for the compliment!

[@johnnyplank3964]

holy fuck, some people are just meant to teach. THank you sir.

[@TheFinanceStoryteller]

You're welcome! This is the kind of comment that keeps me going. 😎 Thanks for bringing me the motivation for today.

[@TheQuietProfessional]

That is one beautiful truck

[@TheFinanceStoryteller]

Thank you, Santiago! My kids contribute to the videos on a regular basis. :-)

[@keertidwivedi8466]

Hey!! Name of channel is super awesome..Loved it. Video is also good.

[@rajjisep]

Keerti Dwivedi true

[@nemilsanghrajka2107]

Why is depreciation and amortization deducted from operating income instead of adding them to EBIT?

[@TheFinanceStoryteller]

When a firm does not have non-operating income, then operating income is sometimes used as a synonym for EBIT and operating profit. At about 01:40 into the video, I show an example of an income statement, where I use EBIT and Operating Income as synonyms. To get from EBIT to EBITDA, you will have to add back depreciation and amortization. To get from EBITDA to EBIT, you deduct depreciation and amortization.

[@chrisdennett7452]

Very clear

[@TheFinanceStoryteller]

Thank you!

[@fosdam]

Well that was great! Thank you!!

[@TheFinanceStoryteller]

Thank you, Joe! :-)

[@Blazetoamaze]

Very helpful thank you

[@TheFinanceStoryteller]

Great to hear that, Rob! I have made a few more related videos with EBITDA examples and how to calculate EBITDA from financial statements of actual companies: kzbin.info/www/bejne/hGe9mHyMdraYjrM

[@aggsare8869]

short and sweet

[@MrShanks008]

Thanks for this, I lso wanted to know what is Adjusted EBITDA ? in a similar easy story telling way :-)

[@TheFinanceStoryteller]

Thank you! How "Adjusted EBITDA" is defined tends to differ by company, and needs to be disclosed by a company in its earnings release. Generally, EBITA is higher than EBIT, EBITDA is higher than EBITA, and adjusted EBITDA is higher than EBITDA. The more line items you take out, the higher the profitability, and the closer you get to revenue. ;-) See my video on EBIT - EBITA - EBITDA kzbin.info/www/bejne/pHrQoWhnr76Wr5Y For an example of "Adjusted EBITDA", see the replay of my livestream on Uber Technologies 2020Q1 results, scroll through until you get to that section: kzbin.info/www/bejne/bmikmJKendiYhaM

[@MrShanks008]

@@TheFinanceStoryteller I have just become a supporter of your channel. Thanks once more :-)

[@TheFinanceStoryteller]

@@MrShanks008 Much appreciated!!!

[@fak119]

Why is amortization not explained?

[@TheFinanceStoryteller]

I cover that in a separate video: kzbin.info/www/bejne/mZqaY5SViN95mbM

[@sidharthmohanty6434]

Thank you very much.

[@karinawegrowska892]

thank you! your video really helped me, cheers!

[@TheFinanceStoryteller]

Good to hear that, Karina! I plan to cover more financial terms in upcoming videos. Any requests? ;-)