GREY:XEBEQ - Post by User
Post by
Newtrader1982on Sep 01, 2021 1:50pm
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Post# 33795195
Food for thought
Food for thought
Some companies can misuse the EBITDA margin in order to make their company seem more profitable, given that the EBITDA excludes debt in its calculations. For this reason, companies who hold a lot of debt and have higher interest payments generally should not use EBITDA to evaluate their efficiency. Additionally, because the EBITDA margin is typically a bit higher than a profit margin, companies that don't have very high profitability shouldn't use EBITDA either, as it may overestimate their company's position. And, as a non-GAAP metric, EBITDA margins can sometimes be manipulated by companies, which can be dangerous or harmful for investors and analysts. Even Forbes claimed that the EBITDA was a "Great Big Lie" in 2011 - stating that EBITDA makes asset-heavy companies look better, is selective about debt, ignores working capital requirements and lacks GAAP guidelines.