What separates EBITDA from Operating income?

[woodywoodford]

Probably a stupid question but I seem to be getting conflicting answers and can’t find anything in the notes.

 

[chad.sandstedt]

Operating income already has the impact of depreciation and amortization expense factored into it. EBITDA is basically operating income plus depreciation and amortization.

 

[black_label]

^bang on. Operating income is EBIT.

 

[woodywoodford]

That’s what I thought… my boss, a CA, was telling me it was EBITDA less the IT though, so “EBDA” effectively so I was very confused. Would EBDA be NOPAT? (NOPAT/NOPLAT aren’t covered in L1 ASFAIK)

 

[higgmond]

Basically agree with chad and black_label except that you need to be very careful taking a company’s stated EBITDA or EBIT at face value. Although defined by the the fact that they are acronyms, neither EBIT nor EBITDA are officially defined by the SEC or the AICPA, so companies can publish just about any EBIT or EBITDA number they like and will often omit a lot of things they consider to be nonrecurring or nonoperating. You often need to do a lot of digging in the notes to find out exactly what is or isn’t in EBIT or EBITDA.

 

[mdsds]

An example of a situation where EBDA might be a proxy for operating income is a leasing or rental car company. The deprecation of the fleet and the financing costs are true operating items. You could add back the corporate D&A (not the deprec of the cars which is the majority of the figure stated on the statement of cash flows) to get to some “EBITDA” equivalent. To calculate the enterprise value, you use the non-fleet debt and cash. The beauty (or the headache) of this business is that everything is subject to analysis and adjustment, so you can’t just take a line item on reported GAAP or IFRS financial statements as a standard!