Earnings Before Interest, Taxes, Depreciation & Amortization (EBITDA)

        

Appraisers use EBITDA, which has been generally defined as earnings before interest expense, income taxes, depreciation and amortization, when they appraise properties with business entities.  Since EBITDA can be used to compare the profits of similar business entities, because it eliminates differences in accounting / financing decisions, it is a useful figure for analytic comparison in an appraisal report.

 

EBITDA gives a market participant or investor some idea about how a going-concern can handle its current or forecasted debt.  EBITDA is a non-GAAP (Generally Accepted Accounting Principle) term that allows its user more flexibility with regard to what is and what is not included in its calculation.

 

While the terms includes "earnings," it is used as an indicator of profitability and not cash flow.  The term "leaves out the cash required to fund working capital and the replacement of old equipment, which can be significant." (Investopedia at 

http://www.investopedia.com/terms/e/ebitda.asp )

 

Contact us with your questions or concerns regarding EBITDA or regarding your appraisal assignment in Nevada via e-mail at grigdon@cox.net or by phone at 1-702-568-6699. 

 


                                                     



Copyright 2007 Horizon Village Realty & Appraisal

Commercial Real Estate Appraisals in the Las Vegas & Henderson, Nevada Area.