EBITA

Corporate executives put a ton of emphasis on EBITA (Earnings before Interest, Taxes, and Amortization). Executives expect EBITA to be a certain percentage, or the company is not doing well. A 20-30% EBITA is typical, but in a bad economy, it’s almost impossible. Each department is required to meet their own EBITA goals as well as each branch, and the company as a whole. EBITA provides a good start to determine financial strength; however, there are other ways of measuring the organization’s strength. Balance sheet, Income Statement, Owner Equity, Ratios, and Cash flow are often neglected when determining organizational strength. A company must be strong in all areas. Although EBITA is important, I think analysis in every area of the organization is just as important. Too much emphasis is often placed on EBITA, and it may not provide a true and accurate picture.