Ann: Disclosure Document - Supplementary Prospectus, page-35

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30/12/16

14:34

Post #: 21610979
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Originally posted by cmonaussie ↑

in case there is any confusion surrounding the usefulness of EBITDA (and EBITDAX for E&P) with respect to profitability of a company this ought to help.

This is for Bonanza Creek Energy (BCEI) a DJ Basin Wattenberg Field focused E&P now filing for CH 11.
EBITDA-BCEI

Highlights of EBITDA description: BOLDING IS MINE FOR EMPHASIS

EBITDA is a cash flow measure that ignores changes in working capital. EBITDA minus Depreciation, and Amortization (DA) equals Operating Income. Operating Income is profit before interest and taxes. Of course, Interest and taxes need to be paid.

While depreciation and amortization expenses do not need to be paid in cash, assets - especially tangible assets - do need to be replaced over time. EBITDA is not a measure of profit in any sense. EBITDA is a measure of cash generation by a business where the uses of that cash may be more or less discretionary depending on the nature of the business.

The EBITDA of a TV station is largely discretionary. Owners may use much of the EBITDA generated by a TV station as they see fit. The EBITDA of a railroad is largely non-discretionary. Owners must use much of the EBITDA generated by a railroad to replace the physical assets of the railroad or the business will literally fall apart over time.

Although depreciation is not a cash cost it is a real business cost because the company has to pay for the fixed assets when they purchase them. Both Warren Buffett and Charlie Munger hate the idea of EDITDA because in this calculation, depreciation is not counted as an expense.

EBITDA over Revenue is a good metric for comparing the operating efficiencies between companies because EBITDA is less vulnerable to companies accounting choices. For this reason, EBITDA is used in ranking the Predictability of Companies. Also price/EBITDA is sometimes used in valuations.

Anyway interpret as you see fit. I use EBITDAX in multiple comparison between companies for valuation purposes and to look for operational efficiency (as in what the asset might be worth to a buyer not the whole company).

Lots of EBITDA potential within all those companies that filed CH11 too.

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Throwing pearls to swine Cmon.

The truth be said in AKKs case , ebitda, ebit, NPAT , free cash flow all irrelevant as they are not about to make a dollar excess to costs for a very long time if ever

Listening to junior argue is like a year 7 student in a science lab with a Bunsen burner with no gas connected arguing with Einstein. At some point you have to just ignore it as there is no point discussing

AKK Price at posting: 0.5¢ Sentiment: None Disclosure: Not Held
9 Upvote

0 Great analysis

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Ann: Disclosure Document - Supplementary Prospectus, page-35

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