THE LEX COLUMN: Ebitda an elixir for boardroom lies — but not for long
Ebitda is the new punchline to an old joke. A CEO asks the finance director what profits are. The numbers tamer replies: “What do you want profits to be?” Ebitda has the flexibility bosses crave, but which statutory profits lack. It has become a ubiquitous measure of corporate earnings.
For investors, clarity and comparability matter more. That is why the International Accounting Standards Board (IASB) plans to clamp down on ebitda. This stands for “earnings before interest, tax, depreciation and amortisation” and is seen as a measure of cash earnings.