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Pastimes : CNBC -- critique. -- Ignore unavailable to you. Want to Upgrade?

To: S. maltophilia who wrote (10996)	6/28/2002 6:40:42 PM
From: Elmer	Read Replies (2) \| Respond to of 17683

<EBITDA is not cash flow, it's not earnings, it's nothing but the status of a bet. It's not illegal, but neither is it investing> No, EBITDA is earnings, it is just not net earnings as defined by GAAP. And EBITDA is a very appropriate way of measuring the return on highly leveraged investments. EBITDA is an accounting measure. I don't understand your comment that EBITDA is "not illegal, but neither is it investing." Because lots of people aren't understanding this and CNBC isn't helping at all, let me explain. EBITDA is an earnings measure similar to P/E that is used to compare highly leveraged companies. In the P/E multiple, you take the price of a share of stock and divide it by the earnings per share. Highly leveraged companies, because they have high interest expense and depreciation and amortization charges, don't usually have a positive E in the P/E calculation. So, instead of differentiating types of capital such as debt or equity, just added the value of the total long-term debt and equity together and divide it by the funds generated by the business to service these forms of invested capital, namely EBITDA. The multiple derived therefrom allows you to compare the relative values of the subject firm with other highly leveraged firms. CNBC would rather write little songs about EBITDA and with adolescent glee malign accountants and the management of these firms rather than explain what's going on. I don't think they have the smarts to be informative here. Not Maria and not David, the so-called "Brain."