EBITDA
EBITDA is an acronym for "Earnings Before Interest Taxes Depreciation and Amortization." It is calculated by adding "selected" expense items such as Interest expenses, Income taxes, Depreciation and Amortization back into earnings or net income. By adding "selected" expense items back into to a company's net income "more positive" earnings or CFPS numbers can be manufactured.
When utilizing EBITDA an analyst or CFO is actually stating, "This is what our earnings would have been if it were not for interest, taxes, depreciation and amortization.") Because it is based upon earnings, EBITDA is subject to the same "creative" accounting inherent in many earnings reports. EBITDA frequently does not reflect a company's true cash flow. Like CFPS, EBITDA is a manufactured "creative accounting" interpretation that presents a company in the best possible light.
EBITDA's original use was for lenders to determine credit viability. Today these interpretations are used primarily by companies and Wall Street analysts to promote stock to an unwary public. Commonly, when EBITDA or CFPS are used in this way they are deceptively called "cash flow" or some form thereof. This twisted use of the word "cash flow" means that the investing public can only rely on Stock Diagnostics' "OPS" (Operational-cashflow Per Share).
Unlike CFPS, EBITDA and other interpretive cash flow declarations, StockDiagnostics.com "OPS" (Operational-cashflow Per Share) is the only one that is derived solely from the "actual" Corporate Financial Statements filed with the SEC. Fundamentally, any cash flow calculations based on earnings must be contrasted with StockDiagnostics.com "OPS" (Operational-cashflow Per Share).