📝 What is EBITDA & EBIT?

💡 What is EBITDA & EBIT? Imagine Bunty runs a lemonade stall 🍋. He sells lemonade, makes profits... but wait! Before he can call this profit, he has to take care of some things like rent, tax, loan interest etc. Here’s where EBITDA & EBIT help us understand the real picture! 🔍 🎯 What is EBIT? 👉 EBIT = Earnings Before Interest and Tax ✔️ This shows how much Bunty earns from his lemonade stall after paying for lemons 🍋, sugar, ice ❄️, glasses, stall rent etc. ✔️ But before he pays: ❌ Loan interest to bank 🏦 ❌ Income tax to government 💰 🎨 Example: ✔️ Bunty earns ₹50,000 profit after running the stall. ✔️ But has not yet paid ₹5,000 bank interest + ₹2,000 tax. 👉 So EBIT = ₹50,000 — Profit before paying these things. 👉 EBIT shows “how good is the business at generating profit from its daily work” — no extra stuff like tax or interest! 🎯 What is EBITDA? 👉 EBITDA = Earnings Before Interest, Tax, Depreciation & Amortization ❓ What’s this new word "Depreciation & Amortization"? ✔️ Depreciation = Bunty’s lemon-squeezer machine gets old every year — its value goes down! 🧃 ✔️ Amortization = Same for things like shop licenses or rights — they lose value with time. 👉 EBITDA skips all these too — showing pure profit from daily business, without worrying about machine aging or paper costs! 🎨 Example (Continued): ✔️ Bunty earns ₹50,000. ✔️ Spent ₹3,000 on machine wear & tear (Depreciation). 👉 EBITDA = ₹50,000 + ₹3,000 = ₹53,000 ✔️ Means EBITDA shows his shop made ₹53,000 pure profit from selling lemonade — before bank, tax or machine loss matters. 🔍 Difference in Simple Words: ✔️ EBITDA = Business profit ignoring machine age & paper stuff too! 🧾 ✔️ EBIT = Business profit ignoring only tax & bank interest! 💸 🧐 Why Important for Investors? ✔️ Shows real business strength — without finance or tax tricks. ✔️ If EBITDA is good = Company’s core business is solid! 💪 ✔️ If EBITDA is bad = Business not making enough — worry! 🚨 🎈 Funny Tip: ✔️ EBITDA is like knowing your salary before rent, EMI, and phone damage costs! 📱🏚️ ✔️ EBIT is like knowing your salary before only EMI and tax, but after phone damage! 😂 🔑 In a Nutshell: ✔️ EBITDA = Total earnings before everything extra! 🏆 ✔️ EBIT = Earnings after ignoring only interest & tax! 💵 ✔️ EBITDA > EBIT (Always!) 💡 "Great companies shine with strong EBITDA — because sales, not excuses, make real profits!" 🚀💰