The difference in Gross Profit and EBITDA

2.7182818284590... wrote on 6/9/11 10:23 AM:

.........and that information will be useful in what way??? A few years ago, someone here published the P/E on the entire S&P 500 to

9(NINE) decimal places.......Nobody ever found a use for that either........

See if this helps explain it:

and...

They want the federal government controlling Social Security like it's some kind of federal program. -George W. Bush

I'd hate to share it if I were lucky enough to hit it.. ha-ha

Life has a way of correcting your errors real fast. Scorned ex-wives can hand you a keg of hurt and your so-called good friends turn out to be thieves. Ugly stuff. Better to work at what you love, even if it just barely pushes you over the line of have/have-not. Most new-rich have a lot more pain than you can imagine.

I know of a nice couple that won the lottery for a nice pop. He was a sign maker and she was a waitress. They bought the ticket while using a coin laundry in Vancouver BC in 1990. This was the BC Lottery and you got it tax free. They started coming apart at the seams until they got a grip. The first couple weeks scared them. Seems most everyone they knew had a money scheme. Funny seeing what previously broke family members started driving.. They looked stupid really. Finally they got grounded but not before watching family members crash and burn.

This notion of great savings doesn't work either.. Society needs the cash to be floating around and not just pumping up the bank statement of the Stupid Rich.

We would all be better off without this great greed we have somehow turned into a good thing.. If you cant spend it in your lifetime you likely don't need it. Pass it on and have people think well of your generosity and gifts to the betterment of your fellow man and you will go down in History and never be forgotten. Bill Gates, Warren Buffett, Andrew Carnegie, JD Rockefeller, and many others.

I think if I hit the lottery I now might be able to handle it. But 25 years ago.. no way Jose.

They want the federal government controlling Social Security like it's some kind of federal program. -George W. Bush

That's easy. I know the answer. In New Jersey, the Mega Millions Lottery numbers on June 10, 2011 were: 18 21 27 37 38; the Mega Ball Number was 07; and the Megapilier Multiplier was 3.

Sorry about my earlier lame attempt at humor (about knowing "tomorrow's" lottery number).

Here is a link to the Wikipedia definition of Gross Margin:

In part, it says,

"Gross margin, gross profit margin or gross profit rate is the difference between the production costs excluding overhead, payroll, taxation, and interest payments and sales revenue."

Gross Margin is simply sales minus the cost of goods sold/manufactured. EBITDA is essentially the cash profit before taxes. It adds back the non-cash expenses of depreciation and amortization.

I just happen to be studying this topic this week. Per my textbook, most of the 147 companies that Moody tracked that went bankrupt in a previous year were issued loans based upon EBITDA. It is a good figure to look at, but only in context of the industry. (Fortune magazine, "Why EBITDA Falls Short" July 10,2000, page 240)

Net sales is gross sales minus cost of goods. From those numbers you can calculate a gross margin the company makes against its cost of production.

Net earnings is net sales minus administrative expenses, sales expenses, R&D, customer support, interest charges, other income/expenses, and non cash charges like depreciation.

EBITDA is an adjustment to net earnings, to remove out the interest expense, taxes, and on cash depreciation and amortization charge. It's similar to an operating cash flow.

You are confusing unlike concepts. Margin is a percentage. EBITDA is an absolute value. What you might want to compare is net sales and EBITDA. Alternately, you might compare ratios. In the latter case you might compare a gross margin (net sales / gross sales) and perhaps someone was trying to calculate an EBITDA ratio of gross sales? EBITDA to gross sales is not a ratio I see commonly used.