Financial Statement Analysis
Assess earnings quality
What you will learn
Reconcile reported earnings to a defensible recurring figure.
Adjusted EBITDA = reported EBITDA − nonrecurring gains + supported nonrecurring costs
Build an adjustment bridge from reported earnings. For each item, ask whether it is operating, recurring and supported by evidence. Review several periods because a cost labelled exceptional every year may be structural. Cross-check the resulting profit against cash conversion, customer concentration and investment needs. A fictional toolmaker reports ₹25 crore EBITDA including a ₹4 crore asset-sale gain. Removing the gain gives ₹21 crore before other adjustments.
A fictional toolmaker reports ₹25 crore EBITDA including a ₹4 crore asset-sale gain. Removing the gain gives ₹21 crore before other adjustments.
Build an adjustment bridge from reported earnings. For each item, ask whether it is operating, recurring and supported by evidence. Review several periods because a cost labelled exceptional every year may be structural. Cross-check the resulting profit against cash conversion, customer concentration and investment needs. A fictional toolmaker reports ₹25 crore EBITDA including a ₹4 crore asset-sale gain. Removing the gain gives ₹21 crore before other adjustments.
Should a recurring hiring expense usually be added back?