What does it mean if a company's EBITDA is greater than the Capital Expenditures?

Expert Solution

EBITDA stands for Earnings Before Interest, Tax, Depreciation and Amortization. It measures the companys financial performance and helps to know how much the company is profitable based on its fundamental operations only.

EBITDA = NetProfit + Interest + Tax + Depreciation + Amortization
EBITDA = Operating profit + Depreciation + Amortization
In Simple terms EBITDA is the difference between revenue and expenses excluding interest, tax, depreciation and amortization.

Capital expenditure is an expense that company incurs while acquiring or maintaining the fixed assets. This expenditure is treated as an asset and is deducted as depreciation over years. Depreciation is a non cash item. In asset depreciation, its a reduction in the value of an asset. its a measure of what the company has spent on capital expenditures.
EBITDA does not take into account any type of capital expenditures inccured by the company.

jeff jeffy answered 2 years ago

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