2023-12-18 14:18:47
In the financial market there are words, jargon or terms, many of them in English and used globally to define transactions and products, which generate doubts regarding their meaning, even for the most familiar, but especially among investors who are starting their financial transactions.
One of them is “Ebitda”, an acronym that comes from the English “Earnings before iinterest, taxes, depreciation and amortization”, and is used as one of the most important numbers for investors to know the potential of companies on the stock exchange and make their investments in the stock market.
In Portuguese, Ebitda is known as “Lajida” and means “Lucros antes of jmale, ipost office, dappreciation and amortization.” Therefore, if the prospectus that includes information to help investors make decisions contains EBITDA or EBITDA, it is the same indicator.
“The Ebitda financial indicator measures the results of a company, considering the amount of resources it generates only in its main activities, without counting the profitability of investments or tax discounts”, he explains. Rodrigo Salimfinancial specialist with more than 15 years of experience in companies in the segment, graduated in Law from Universidade Mackenzie and MBA in Business Management from INSPER/IBMEC.
There are no investments without financial risks, no matter how small they may be. Even those that are traditionally considered safe, such as Treasury bonds, or more conservative investments, such as fixed income, may have some risk of financial loss.
Investments in company shares are even more risky, but they can yield higher returns than other investments, which is an excellent attraction. To do so, it is necessary to monitor the performance of companies and know important and not so simple indicators, such as EBITDA.
“For this reason, for those looking for this type of investment, it is necessary to understand what Ebitda is, in which situations it can be used and why it, alone, is not used to confirm whether a company deserves to receive an investment or not”, says Salim.
It shows whether the company can make money with the main activity it was created for. Ebitda shows, for example, whether a construction company is being efficient in making money by building apartment buildings or whether a vehicle manufacturer is making money by producing cars.
For companies with shares on the stock exchange, Ebitda is used to evaluate their performance, because by observing this indicator, investors interested in buying shares check which companies in the same segment are more efficient and deserve to receive their money.
“As you can see, this measurement of cash generation potential allows investors to identify which companies are more efficient in their operations without external factors, such as high interest rates, interfering in this assessment”, points out Salim.
An interesting fact is that investors use Ebitda to compare companies from different countries, as a company can be extremely efficient and promising, but have its profitability affected, while a less productive competitor can have higher profits, simply due to different taxes.
Although EBITDA is generally presented by companies when reporting to investors, if this does not happen there is the possibility of using reports prepared by financial market analysts and, finally, finding out how companies manage to reach this number.
The first step in calculating this indicator is to know your operating profit, which is net revenue minus the expenses that companies have with operations and the costs of the goods they sell. The most used formula to calculate is: net operating profit + depreciation + amortization = EBITDA.
Even though we know a little more regarding Ebitda, it is important to remember that taxes, interest, amortization and depreciation that this indicator does not take into account are essential to truly understand the financial health of a company.
“Thus, the indicator should only be used to understand the company’s cash generation potential and its operational efficiency, following all, its profitability will depend on other indicators”, concludes Salim.
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