North American Network Operators Group

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EBITDA [was Re: Interconnects]

  • From: Steve Gibbard
  • Date: Sat May 18 21:12:21 2002

On Sat, 18 May 2002, Mike Leber wrote:

> press releases regarding their other choices, or perhaps considering
> whether the companies they consider alternatives are EBITDA postive
> (making a profit, or in otherwords will exist in 12 months) today (not in
> an imaginary planned future) or for the few that are EBITDA positive,
> whether they actually seem to want your business.

"EBITDA positive" does not mean profitable, or even necessarily
financially stable.  EBITDA is earnings before interest, taxes,
depreciation, and amoritization -- all things that tend to have an impact
on your finances.  If you were using EBITDA as the measure of your
personal financial situation, you could spend far more than your after tax
income, but less than your before tax income, and declare yourself to have
come out ahead.  Your bank, however, probably wouldn't see it that way.  
The same goes for corporate finance, except that the corporations that
were announcing their EBITDA numbers as the important financial data often
had enough in the bank, and enough market cap, that it didn't become a
critical problem for a few years.

My understanding is that EBITDA does have legitimate accounting uses, but
I'm not clear on what they are.

I'm tempted to label this message as off-topic nitpicking, but given that
the biggest problem with Internet stability at the moment seems to be
financial, I'm not sure it is.

-Steve

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Steve Gibbard				[email protected]