THE ROLE OF THE ECONOMIC INDICATOR - EBITDA IN MEASURING THE FINANCIAL PERFORMANCE OF THE COMPANY

Gadoiu Mihaela
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Gadoiu Mihaela: FACULTY OF ECONOMIC SCIENCES AND LAW, NATIONAL UNIVERSITY OF SCIENCE AND TECHNOLOGY POLITEHNICA BUCHAREST, PITESTI UNIVERSITY CENTER, ROMANIA

Annals - Economy Series, 2023, vol. 6II, 163-168

Abstract: Through this article, the author aims to present the role of the EBITDA indicator in measuring the financial performance of a company by analyzing its operational profitability. Both the advantages of using this indicator and the shortcomings of using its interpretations were pointed out. Since the method of determining the indicator does not take into account expenses related to debt financing, hence the acronym EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization). EBITDA informs about the amount of profit earned by the company before paying interest, taxes, amortization and depreciation. The profitability of operating activity, quantified by gross operating surplus (EBE or EBITDA) is the most relevant measure of a company's performance, as it reflects its return on its core business, namely production of goods and/or provision of services and marketing activity. Although the financial result can have a considerable impact on the profitability of the firm, the basis of the company's earnings must be its operating activity, since it groups together the operations that the economic entity currently carries out in order to obtain profit.

Keywords: financial performance; economic indicator; amortization; depreciation; taxes and duties; EBITDA (search for similar items in EconPapers)
Date: 2023
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