StocksResult
📝 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!" 🚀💰