Could you tell me the disadvantages of EBITDA
Thanks tutor alot
Ignores changes in working capital
Does not make allowance for replacement of non-current assets
Susceptible to manipulation – as are all profit-based measures.
could you explain more detailed about ” Does not make allowance for replacement of non-current assets”?
Well, EBITDA is, by definition, before depreciation. Yet enough profit/cash has to be retained to replace non-current assets when they wear out. EBITDA might overstate how an organisation is doing because it does not charge for the wearing out of non-current assets.
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