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EBITDA

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA APM Exams › EBITDA

Viewing 4 posts - 1 through 4 (of 4 total)
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  • November 5, 2012 at 4:00 pm #55043
    ddnguyen
    Member
    • Topics: 27
    • Replies: 47
    • ☆☆

    Hi tutor

    Could you tell me the disadvantages of EBITDA

    Thanks tutor alot

    November 5, 2012 at 8:43 pm #106582
    Ken Garrett
    Keymaster
    • Topics: 10
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    • ☆☆☆☆☆

    Ignores changes in working capital

    Does not make allowance for replacement of non-current assets

    Susceptible to manipulation – as are all profit-based measures.

    November 6, 2012 at 10:00 am #106583
    ddnguyen
    Member
    • Topics: 27
    • Replies: 47
    • ☆☆

    could you explain more detailed about ” Does not make allowance for replacement of non-current assets”?

    thanks alot

    November 6, 2012 at 3:30 pm #106584
    Ken Garrett
    Keymaster
    • Topics: 10
    • Replies: 10649
    • ☆☆☆☆☆

    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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