EBITDA

Review of Enterprise Value and comparing it to EBITDA

Category:

Education

Tags:

• earnings
• before
• interest
• taxes
• depreciation
• amortization
• EBITDA

[stefanboro]

I am only 3 mins into the video so I ask this question without viewing the full contents of the video.

You say that EV + cash = Debt + market cap

However, won't the market cap be different from the book value of shares?

Therefore is it not incorrect to have market cap in the equation as opposed to tbe book value of equity?

[khanacademy]

Market cap is the market value of the equity so if you want to establish the market value of the EV, you would use market cap. Book value of equity would give you the book value of EV

[numerouss]

I want to draw as well. What is this program?

[de0den]

What confuses me is similar to what confuses stefanboro above, I think. The balance sheet equation is for operating assets and equity, which are not the same, mathematically, as EV(the market value of the enterprise) and Mkt Cap. It seems to me the ratios of EV-to-OperatingAssets, and MktCap-to-BookValue (P/Bk?) should be significant. I have trouble with terminology when learning complicated new subjects.

[teknashend]

very well done. Question:

so EBITDA is the "raw cash" that a company makes. But technically, since EBITDA is NI + a bunch of added back line items, and NI isn't actually cash ( that's why analysts look at Price/Cash flow to put P/E in perspective) , then what is ebitda technically? isn't it just a theoretical profit number like NI but one that only excludes COGS and SG&A?

also, i've herd that EBITDA is a proxy for cash flow. Which cash flow? OCF, or FCF? and how so? can you elaborate? Thnks

[cmares5858]

@stefanboro. I would say that book value is only really important when trying to figure out the value of "capital intensive businesses". like a bank or any company that needs capital and assets to generate income/revenue, example: GE, CAT, BAC. Think about an internet company though, they are NOT a capital intensive business. Their profits are made from intellectual property and other such things. So in the case of a non-capital intensive business cash flow and income are more important. than BV

[Captnzoss]

Hello, when you talk about "Debt", does that include things like holiday pay liability, tax liability and accounts payable?

[49fiori]

@elfenelfenelfen I agree, he is amazing!

[49fiori]

This was more than smart - thank you!

[tamubasketball]

dude you are a freaking genius. i am so jealous and am going to watch all your videos. especially the finance related material

[afaqkhanpwr]

Sal, i wish i could meet you someday to thank you for your incredible videos. Both your knowledge and teaching skills are superb. By the way i have only watched your math and stats videos - (and looking forward towards more stats videos eagerly since it my weak area). Having done MS in Finance, i m watching your finance videos just because i m addicted to your voice.

[eulima19]

you sal deserve the nobel prize for education!!!