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Many companies publicly describe their performance using terms such as “EBITDA” or “earnings purged of various...

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Accounting

Many companies publicly describe their performance using termssuch as “EBITDA” or “earnings purged of various expenses” becausethey believe these terms more effectively reflect their companies’perfor-mance than GAAP-defined terms such as net income. Whatethical issues might arise from the use of such terms and whatchallenges does their use present for the governance of the companyby stockhold-ers and directors?

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Answer Many of the bankers nowadays interested in EBITDA as it is the operating cash flow without any non cash expenses like depreciation and amortization but it can be misused alsoNot    See Answer
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Many companies publicly describe their performance using termssuch as “EBITDA” or “earnings purged of various expenses” becausethey believe these terms more effectively reflect their companies’perfor-mance than GAAP-defined terms such as net income. Whatethical issues might arise from the use of such terms and whatchallenges does their use present for the governance of the companyby stockhold-ers and directors?

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