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by blackeyeblitzar
465 days ago
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EBITDA = Earnings before interest, taxes, depreciation and amortization Basically, it is a profit like number that tells you something about the core business, but it isn’t just the straight up raw profit number of having more cash than previously when all said and done. The person you’re responding to was claiming that they used this EBITDA number to claim they were profitable, when they really were not since presumably, once you account for those costs that are excluded from EBITDA, they may have not been profitable. |
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Excluding depreciation makes sense when you are dealing with assets with an unknown highly variable lifespan - e.g. software - some of which lasts decades without being touched, others of which experiences breaking changes on a monthly basis. Similarly, excluding interest on debt makes sense if you're borrowing heavily to feed your sales funnel, but otherwise making very real profits on your sales.
However - none of these are true for some of these "new-wave" startups, which are trying to justify an (internet-based marketing) hype cycle to juice their valuations via the "dumb money".