Discount basis and EBITDA: Difference between pages

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This term can refer either to the cash flows of an instrument (Discount instruments) or to its basis of market quotation (Discount rate).
''Profitability.''


Earnings Before Interest, Tax, Depreciation and Amortisation.


'''Example'''


An instrument is quoted - on a <u>discount basis</u>, one period before its maturity - at a discount of 10% per period.
EBITDA is designed to compare underlying operating performance over time or between businesses, free from any distortions caused by differing financial structures, tax, or the historical cost of fixed assets.


This means that it is currently trading at a price of 100% LESS 10% = 90% of its terminal value.


(The periodic ''yield'' on this instrument is 10% / 90% = 11.11%.  So if the same instrument had been quoted on a <u>yield basis</u>, then the quoted yield per period = 11.11%.)
Sometimes written in lowercase as ''ebitda.''


EBITDA means the same as [[EBITA]].


The relationship between the periodic discount rate (d) and the periodic yield (r) is:


r = d / ( 1 - d )
== See also ==
 
* [[Amortisation]]
So in this case:
* [[Capital structure]]
 
* [[Depreciation]]
r = 0.10 / ( 1 - 0.10 = 0.90 )
* [[Earnings]]
 
* [[EBIT]]
= 11.11%
* [[EBITA]]
* [[EBITDA multiple]]
* [[EBITDAR]]
* [[Free cash flow]]
* [[Gross profit]]
* [[Interest]]
* [[Multiples valuation]]
* [[Net profit]]
* [[PBT]]
* [[Profitability]]


 
[[Category:Accounting,_tax_and_regulation]]
== See also ==
[[Category:Corporate_finance]]
* [[Discount instruments]]
[[Category:Investment]]
* [[Discount rate]]
[[Category:Long_term_funding]]
* [[Sterling commercial paper]]
[[Category:Treasury_operations_infrastructure]]
* [[US commercial paper]]
* [[Yield basis]]
* [[Effective annual rate]]
* [[Nominal annual rate]]
* [[Periodic yield]]

Revision as of 10:44, 7 December 2022

Profitability.

Earnings Before Interest, Tax, Depreciation and Amortisation.


EBITDA is designed to compare underlying operating performance over time or between businesses, free from any distortions caused by differing financial structures, tax, or the historical cost of fixed assets.


Sometimes written in lowercase as ebitda.

EBITDA means the same as EBITA.


See also

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