Corporate Finance Career® on LinkedIn: EBITDA explained for beginners. Credits to Andrew Lokenauth follow him… (2024)

Understanding the 3 Financial Statements 📄 📄 📄Every action in your Finance & Accounting department impacts these 3 statements in some wayLet’s explore each one in detail:📄 𝐈𝐍𝐂𝐎𝐌𝐄 𝐒𝐓𝐀𝐓𝐄𝐌𝐄𝐍𝐓 (also known as Profit & Loss)This shows how much your company is EARNING… and how much your company is SPENDINGHere are the main sections (and what they mean):⚫ REVENUEThe amount earned from sales⚫ COGSThe cost to produce or deliver your product or service⚫ GROSS PROFITYour profit margin from selling your product or service (Revenue - COGS)⚫ OPERATING EXPENSESAll other costs that relate to running your core business, but are not directly involved in producing or delivering your product or service (IE not COGS)⚫ NET OPERATING INCOMEGross Profit minus Operating Expenses⚫ OTHER INCOMEMoney earned that is not part of your core business (common ones can be interest income, or cash back from credit cards)⚫ OTHER EXPENSESExpenses that are incurred that are not part of your core business (common ones can be depreciation and interest expense)⚫ NET OTHER INCOMEOther Income - Other Expenses⚫ NET INCOMENet operating income plus other income📄 𝐁𝐀𝐋𝐀𝐍𝐂𝐄 𝐒𝐇𝐄𝐄𝐓Here you can see a snapshot of everything the company OWNS (assets)…as well as everything the company OWES to creditors (liabilities)…and the money invested in the business through contributions & previous profits (owners equity)It has 3 sections:⚫ ASSETSWhat the company owns that has economic value.Common ones are cash, accounts receivable, and prepaid expenses⚫ LIABILITIESWhat the company owes to creditors. Examples can include credit card balances, accounts payable, and deferred revenue⚫ EQUITYThis is the net worth of the company that the owner’s can claim, and is usually made up of amounts invested, and previous earnings (retained earnings)📄 𝐒𝐓𝐀𝐓𝐄𝐌𝐄𝐍𝐓 𝐎𝐅 𝐂𝐀𝐒𝐇 𝐅𝐋𝐎𝗪𝗦This statement shows you all of the details that explain the changes in your cash balance on the balance sheet.It consists of 3 sections⚫ CASH FROM OPERATING ACTIVITIESThis section shows all of the cash flows from activities related to running the business⚫ CASH FROM INVESTING ACTIVITIESHere you show the cash movements from long term assets⚫ CASH FROM FINANCING ACTIVITIESHere you show the cash from all equity investments and debt injections / repayments from the companyThis summary is just a brief overview of these 3 statements - what else would you add to this topic?Let us know by joining the conversation in the comments below 👇#yourcfoguy #finance #startups #accountingandaccountants #bookkeepingservices #quickbooksonline #quickbooksserviceprovider #accountingservices #taxationservices #acccounting #charteredaccountant #dynamics365 #dynamics365fo #businesscentral

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Book Value and Equity are very Important too.

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This is the best simple illustration of EBITDA I have come across.

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The chart below clearly explains what EBITDA is and why it’s important. It took me forever to figure out this simple term. I would nod my head and just agree with everyone else in the room and assume I was just dumb. One day I did ask someone and they were kind enough to explain it to me. It’s ok not to know, it’s not ok to never learn. Don’t be afraid to ask questions or research things you might not know, today. Always stay open to learning a little something wherever you are and from whomever you’re with.

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"EBITDA: a powerful metric for financial analysis! 💼 Discover its importance. #ebitda #financialmetrics #businessinsights #profitability #Finance"

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EBITDA explained for beginnersWhat is EBITDA? Why is it important?Here's everything you need to know about this popular finance term:When you look at a company's EBITDA, you're getting a clear picture of how much cash flow it's generating from its core operations.EBITDA helps people compare different businesses, even if they're in different industries or have different ways of financing themselves.By looking at EBITDA, you can get a clearer picture of how efficiently each business is running, regardless of their different situations.What exactly is EBITDA?EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. Let's break it down:1) Earnings: This is the money a company makes from its business activities.2) Before: This means we're looking at the earnings before some other things happen.3) Interest: This is the money a company pays to borrow money.4) Taxes: These are the payments a company makes to the government based on its earnings.5) Depreciation: This is when the value of a company's assets (like equipment or buildings) goes down over time because they get old or wear out.6) Amortization: This is similar to depreciation, but it's for intangible things like patents or trademarks that also lose value over time.Why is EBITDA important?It's important for a few reasons:A) It helps compare companies: Since EBITDA doesn't include the effects of taxes, interest, depreciation, and amortization, it makes it easier to compare companies in different countries or with different financial structures.B) It shows a company's core profitability: By looking at EBITDA, we can see how well a company is doing in its main business activities without being affected by things like taxes or how they finance their operations.C) It can help with decision-making: EBITDA is often used by investors and analysts to decide if they want to invest in a company or not. It can also help companies make decisions about their own operations.Here are tips for using EBITDA effectively:A) Compare apples to apples: When comparing EBITDA between companies, make sure they are in the same industry and have similar business models.B) Look at trends: Evaluate a company's EBITDA trend over time to see if it's improving or declining.C) Consider other metrics too: While EBITDA is a useful metric, it's not the only one that matters. Consider other metrics like revenue growth, net income, and cash flow.D) Be mindful of non-recurring items: Sometimes, companies may have non-recurring items that affect their EBITDA. Make sure to adjust for these items when comparing EBITDA between companies.E) Use EBITDA multiples: EBITDA multiples are often used to value companies. Divide a company's enterprise value by its EBITDA to get its EBITDA multiple. A higher multiple indicates a higher valuation.👋 If you liked this post, please repost it ♻️ to share with others!👍Thank you!

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The most common Term use in shark 🦈 Tank India Here is the explanation of it ✅ #sonypictures #sharktankindia #sharktankindiaseason3 #sonyliv #linkedingrowth #linkedinforcreators

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Gives a far better comparison between companies within the same sector in different regions

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Simple model for understanding EBITDA and why it it a useful tool when your role is not directly associated with an accounting department.