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A company's earnings before interest, taxes, depreciation, and amortization (commonly abbreviated EBITDA, [1] pronounced / ˈ iː b ɪ t d ɑː,-b ə-, ˈ ɛ-/ [2]) is a measure of a company's profitability of the operating business only, thus before any effects of indebtedness, state-mandated payments, and costs required to maintain its asset base.
Four-wall distribution is termed after the four walls of a movie theater. [2] In this process, a film company spends at least one or two weekends renting a movie theater from the facility's owner for a flat fee. [3] [4] The company receives all of the box-office revenue, while the theater keeps sales from popcorn and concessions.
A professional investor contemplating a change to the capital structure of a firm (e.g., through a leveraged buyout) first evaluates a firm's fundamental earnings potential (reflected by earnings before interest, taxes, depreciation and amortization and EBIT), and then determines the optimal use of debt versus equity (equity value).
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Unlevered free cash flow (i.e., cash flows before interest payments) is defined as EBITDA − CAPEX − changes in net working capital − taxes. This is the generally accepted definition. If there are mandatory repayments of debt, then some analysts utilize levered free cash flow, which is the same formula above, but less interest and ...
[4] Debt ratios measure the firm's ability to repay long-term debt. [5] Market ratios measure investor response to owning a company's stock and also the cost of issuing stock. [6] These are concerned with the return on investment for shareholders, and with the relationship between return and the value of an investment in company's shares.