Scribd
Upload
192 views

EBTA

EBITA is used to calculate profitability and efficiency ratios for firms. It is similar to EBIT but removes amortization, which is a non-cash item that does not interest serious investors. To calculate EBITA, locate the net income on a company's income statement, add up the line items for interest, taxes, and amortization, and subtract that total from the net income. This provides the Earnings Before Interest, Taxes, and Amortization number. While EBITA can help evaluate investments, it does not indicate cash flow, and thorough research is still needed to determine if a company is a viable investment.

Uploaded by

pranjalgoswami
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
192 views

EBTA

EBITA is used to calculate profitability and efficiency ratios for firms. It is similar to EBIT but removes amortization, which is a non-cash item that does not interest serious investors. To calculate EBITA, locate the net income on a company's income statement, add up the line items for interest, taxes, and amortization, and subtract that total from the net income. This provides the Earnings Before Interest, Taxes, and Amortization number. While EBITA can help evaluate investments, it does not indicate cash flow, and thorough research is still needed to determine if a company is a viable investment.

Uploaded by

pranjalgoswami
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 2

c  

 
? m
             


? Ú
            
     
 


? ’
            
   
 c



!  "#$%    c& #$

"''$$$
$
'$()*)+,,(   - 
. /0%12 
V

Earnings Before Interest, Taxes and Amortization or EBITA is used commonly when calculating
profitability and efficiency ratios for firms. The numbers needed for calculating this are often found in
a company's income statement. This is what some people use to get a ballpark figure of their raw
earnings.

Earnings before interest, tax and amortization or EBITA is almost like EBIT but removes amortization
because it is always a non-cash item and doesn't interest most serious investors. Just to give you an
idea on how negligible amortization is to serious investors, they take more into consideration
depreciation when determining viability. Amortization often relates to a company's intangible assets
and can't be used even in rough approximation for replacement cost.

Just follow the steps below to calculate your EBITA. You'll need the company income statement and a
handy Y Y  to do the math for you.

y 9ocate the income statement. Companies usually provide these without much red tape and
bureaucracy. This document will show you a company's profit and loss this is important. When
you have the company income statement, look for the net income.
y  ext, locate the line items for interest, taxes and amortization. Add up these line items. This is
your total.

y ñinally, subtract the total you got from computing line items for interest, taxes and
amortization in Step 2 from the amount you computed for in Step 1. The result of this is your
EBITA.
Calculating for EBITA is done in those easy to follow steps and you should come up with a robust
number that will help you make decision regarding your investments. But be advised that Earnings
Before Interest, Taxes and Amortization or EBITA is not cash flow. A company that has great Earnings
Before Interest, Taxes and Amortization or EBITA does not mean they have good cash flow.

 owadays, it's easy to compute for EBITA. In fact, it is taught in many basic business courses in any
kind of learning institute. Knowing ~Y Y  for this doesn't mean that it is the formula for success
or that you know how to invest in a company. Success in investment means you have to do 
~
 when it comes to which companies are viable for investments.

If you are using EBITA calculations for determining investment you may want to refer to the site below
for a crash course    

http://www.expectationsinvesting.com/tutorial3.shtml

Here are also a few sites that give you an overview of investment and business

http://www.allbusiness.com/company-activities-management/financial-performance/10053525-1.html

Always be wary of online information! Some "experts" make it out that investing is easy and low-risk.
 othing can be further from the truth as even small scale business men know that a lot is at stake in
any level of business. When digesting online information, always be mindful of columnist's ulterior
motive. People can make numbers prove anything and can be quite convincing when crunching
impressive numbers. They may be trying to get you to invest in something they've sunk their money
in and would just like to recoup their losses.

Armed with the basic computation formula for EBITA and if you do a bit of online investigating, you
should be able to figure out which companies are good investments. It's a risk, but if you're lucky and
have the right information that risk will pay

You might also like