CLOSE X
Algo Trading
Home

Blogs

Stock Market Blogs

What is EBITDA? September 06 2022Stock Market Education

Visit Count: 196

What is EBITDA?

To measure the earnings of a company, EBITDA is one of the key metrics. It stands for earnings before interest, taxes, depreciation, and amortization. Using EBITDA as an indicator you can find out the real value of a business. EBITDA is significant for the company to evaluate its performance with previous years and competitors. Whereas, investors use EBITDA to determine the safety of their investments along with the dividend they may expect. The meaning of EBITDA is very important as investors make predictions about a company based on it.

What does EBITDA mean?

EBITDA or earnings before interest, taxes, depreciation and amortization is useful for computing the performance of the business by knowing the profits or losses a business is making. It provides lenders and investors with data about business performance in terms of its finances. It also provides an estimation of the operational viability of the business. Since EBITDA measures the financial performance of a company before external factors like taxes and interest, it is often used as an alternative to net income.

How to calculate EBITDA

There are two ways to calculate the EBITDA. They are;

·         EBITDA = Net Profit + Taxes + Interest + Amortization + Deprecation

·         EBITDA = Operating Income + Amortization + Depreciation 

Significance of EBITDA

EBITDA is significant not only for the company but also for its stakeholders. Investors invest in a company or buy its shares only after considering the genuine performance of the company i.e. EBITDA. Through EBITDA the investors come to know about the operational performance and profitability of the company. When investors purchase shares after considering a rise in the EBITDA of a company, the prices of the shares move up. And when the performance or EBITDA falls the supply of shares increases in the stock market and its price falls. Similarly, EBITDA is important for lenders to understand whether they will be able to recover the amount lent or to know whether the money can be given as a loan to a company. EBITDA is used by a company to monitor its performance and compare it with its peers.

Advantages of EBITDA

The following are the advantages of EBITDA;

· Gives a reliable overview of the future growth of the business by giving a clear picture of the operating profitability.

· It gives an actual account of the expenses that a business requires for its regular functioning.

· It helps in comparison of a company with its competitors.

· EBITDA gives a clear view of the company’s cash flow generation during the ongoing business.

· The formula for EBITDA calculation is simple and can be easily derived.

The above mentioned are some of the benefits of EBITDA. The start-ups that require funds have many reasons to use EBITDA as their top indicator. It is a critical indicator for a company when it is used in good faith. It helps the company and its stakeholders to take wise decisions regarding the future direction. With EBITDA all parties are clear about the future performance of a company and comparison with the competitors can also be done easily. EBITDA is also useful for investing in stocks. If you want to learn about using EBITDA as an indicator for long-term investing you may get in touch with Indira Securities

COMMENTS
Form
Categories
Blog Enquiry

Prevent Unauthorized Transactions in your demat and trading account --> Update your Mobile Number/Email id with your Depository Participant and Stock Broker. Receive alerts on your Registered Mobile for all debit and other important transactions in your demat/trading account directly from CDSL and Stock Exchanges on the same day.........issued in the interest of investors...

1. Stock Brokers can accept securities as margin from clients only by way of pledge in the depository system w.e.f. September 1, 2020.

2. Update your Mobile Number & Email Id with your Stock Broker/ Depository Participant and receive OTP directly from Depository on your Email Id and/ or Mobile Number to create pledge.

3. Pay 20% upfront margin of the transaction value to trade in cash market segment.

4. Investors may please refer to the Exchange's Frequently Asked Questions (FAQs) issued by NSE vide. Circular No. NSE/INSP/45191 dated: July 31, 2020 and NSE/INSP/45534 and BSE vide Notice No. 20200731-7, dated: July 31, 2020 and 20200831- 45 dated: August 31, 2020 and dated: August 31, 2020 and other guidelines issued from time to time in this regard.

5. Check your Securities/ MF/ Bonds in the Consolidated Account Statement issued by NSDL/ CDSL every month.

"As per the directives of CDSL and esteemed Exchanges, it has been made mandatory for every client to furnish their latest KYC details viz. Valid Mobile No., Email- Id & Income range on or before 31.05.2021 else your Account will be marked as Non Compliant and will be Freezed till the compliance of such requirement."
"No need to issue cheques by investors while subscribing to IPO. Just write the bank account number and sign in the application form to authorise your bank to make payment in case of allotment. No worries for refund as the money remains in investor's account."
"KYC is one time exercise while dealing in securities markets - once KYC is done through a SEBI registered intermediary (broker, DP, Mutual Fund etc.), you need not undergo the same process again when you approach another intermediary."
Dear Investor if you wish to revoke your un-executed eDis mandate, please mail us with ISIN and quantity on dp@indiratrade.com by today EOD."
REGISTRATION NOS:

INDIRA SECURITIES PVT.LTD. (SEBI REG.NO.):NSE TMID: 12866, BSE TMID: 663, CDSL DPID: 17000 SEBI REG. NO.: INZ000188930, MCX TM ID: 56470, NCDEX TM ID: 01277, CDSL REG. NO.: IN-DP-90-2015, CIN : U67120MH1996PTC160201

DISCLAIMER:

"INVESTMENT IN SECURITIES MARKET ARE SUBJECT TO MARKET RISKS, READ ALL THE RELATED DOCUMENTS CAREFULLY BEFORE INVESTING."

INVESTORS GRIEVANCE

Shivkumar P. Email: compliance@indiratrade.com. Call : 0731-4797275

Investor grievance complaint : complaint@indiratrade.com

INVESTOR CHARTER