WRITING ASSIGNMENTS

Chapter 11 - Research Question

Part-A

Definition of EBITDA

EBITA stand for Earnings before Interest , Taxes , Depreciation and Amortization which is a fairly accurate measure of a company 's operating cash flow on data from the company 's income statement . It is calculated by deducting the operating expenses excluding depreciation and amortization from the Gross Profit

Why companies used it

This technique is mostly used by the companies who have large amounts of fixed assets which are subject to high depreciation rate which cause an huge amount of depreciation expense

for example manufacturing companies or in the case where a company has a large amount of acquired intangible assets and is thus subject to large amortization expense for example a company who has purchased a brand of the company or acquired an Intangible asset recently

EBITDA is a useful measure to compare the company within and across the industry because distortniaray and finance accounting has no impact on EBITDA

It is also very much helpful for the company 's lender because EBITDA is essentially the income that company has free for making interest payment to lenders . Generally , EBITDA is very useful only for assessing larger companies which have important assets , and /or for companies with a major quantity of debt financing . It is not a useful measure for evaluating low capital organization with have not taken too much loans or acquired capital asset

Part-B

The Worldcom has capitalized an operating expense of amounting to Rs .3 .8 Billion in the fixed...