Definition of EBITA

EBITA

Earnings before interest, taxes, and amortization expense.

fractional interest discount

the combined discounts for lack of control and marketability. g the constant growth rate in cash flows or net income used in the ADF, Gordon model, or present value factor.

Accounting earnings

Earnings of a firm as reported on its income statement.

Accrued interest

The accumulated coupon interest earned but not yet paid to the seller of a bond by the
buyer (unless the bond is in default).

Amortization

The repayment of a loan by installments.

Amortization factor

The pool factor implied by the scheduled amortization assuming no prepayemts.

Amortizing interest rate swap

Swap in which the principal or national amount rises (falls) as interest rates
rise (decline).

Annual fund operating expenses

For investment companies, the management fee and "other expenses,"
including the expenses for maintaining shareholder records, providing shareholders with financial statements,
and providing custodial and accounting services. For 12b-1 funds, selling and marketing costs are included.

Asymmetric taxes

A situation wherein participants in a transaction have different net tax rates.

Base interest rate

Related: Benchmark interest rate.

Before-tax profit margin

The ratio of net income before taxes to net sales.

Benchmark interest rate

Also called the base interest rate, it is the minimum interest rate investors will
demand for investing in a non-Treasury security. It is also tied to the yield to maturity offered on a
comparable-maturity Treasury security that was most recently issued ("on-the-run").

Best-interests-of-creditors test

The requirement that a claim holder voting against a plan of reorganization
must receive at least as much as he would have if the debtor were liquidated.

Capitalized interest

interest that is not immediately expensed, but rather is considered as an asset and is then
amortized through the income statement over time.

Cash flow after interest and taxes

Net income plus depreciation.

Compound interest

interest paid on previously earned interest as well as on the principal.

Covered interest arbitrage

A portfolio manager invests dollars in an instrument denominated in a foreign
currency and hedges his resulting foreign exchange risk by selling the proceeds of the investment forward for
dollars.

Deferred taxes

A non-cash expense that provides a source of free cash flow. Amount allocated during the
period to cover tax liabilities that have not yet been paid.

Earnings

Net income for the company during the period.

Earnings before interest and taxes (EBIT)

A financial measure defined as revenues less cost of goods sold
and selling, general, and administrative expenses. In other words, operating and non-operating profit before
the deduction of interest and income taxes.

Earnings per share (EPS)

EPS, as it is called, is a company's profit divided by its number of outstanding
shares. If a company earned $2 million in one year had 2 million shares of stock outstanding, its EPS would
be $1 per share. The company often uses a weighted average of shares outstanding over the reporting term.

Earnings retention ratio

Plowback rate.

Earnings surprises

Positive or negative differences from the consensus forecast of Earnings by institutions
such as First Call or IBES. Negative Earnings surprises generally have a greater adverse affect on stock prices
than the reciprocal positive Earnings surprise on stock prices.

Earnings yield

The ratio of Earnings per share after allowing for tax and interest payments on fixed interest
debt, to the current share price. The inverse of the price/Earnings ratio. It's the Total Twelve Months Earnings
divided by number of outstanding shares, divided by the recent price, multiplied by 100. The end result is
shown in percentage.

Economic earnings

The real flow of cash that a firm could pay out forever in the absence of any change in
the firm's productive capacity.

Effective annual interest rate

An annual measure of the time value of money that fully reflects the effects of
compounding.

Equilibrium rate of interest

The interest rate that clears the market. Also called the market-clearing interest
rate.

Expense ratio

The percentage of the assets that were spent to run a mutual fund (as of the last annual
statement). This includes expenses such as management and advisory fees, overhead costs and 12b-1
(distribution and advertising ) fees. The expense ratio does not include brokerage costs for trading the
portfolio, although these are reported as a percentage of assets to the SEC by the funds in a Statement of
Additional Information (SAI). the SAI is available to shareholders on request. Neither the expense ratio or the
SAI includes the transaction costs of spreads, normally incurred in unlisted securities and foreign stocks.
These two costs can add significantly to the reported expenses of a fund. The expense ratio is often termed an
Operating expense Ratio (OER).

Expensed

Charged to an expense account, fully reducing reported profit of that year, as is appropriate for
expenditures for items with useful lives under one year.

Forward interest rate

interest rate fixed today on a loan to be made at some future date.

Fully diluted earnings per shares

Earnings per share expressed as if all outstanding convertible securities
and warrants have been exercised.

Gross interest

interest earned before taxes are deducted.

Interest

The price paid for borrowing money. It is expressed as a percentage rate over a period of time and
reflects the rate of exchange of present consumption for future consumption. Also, a share or title in property.

Interest coverage ratio

The ratio of the Earnings before interest and taxes to the annual interest expense. This
ratio measures a firm's ability to pay interest.

Interest coverage test

A debt limitation that prohibits the issuance of additional long-term debt if the issuer's
interest coverage would, as a result of the issue, fall below some specified minimum.

Interest equalization tax

Tax on foreign investment by residents of the U.S. which was abolished in 1974.

Interest payments

Contractual debt payments based on the coupon rate of interest and the principal amount.

Interest on interest

interest earned on reinvestment of each interest payment on money invested.
See: compound interest.

Interest-only strip (IO)

A security based solely on the interest payments form a pool of mortgages, Treasury
bonds, or other bonds. Once the principal on the mortgages or bonds has been repaid, interest payments stop
and the value of the IO falls to zero.

Interest rate agreement

An agreement whereby one party, for an upfront premium, agrees to compensate the
other at specific time periods if a designated interest rate (the reference rate) is different from a predetermined
level (the strike rate).

Interest rate cap

Also called an interest rate ceiling, an interest rate agreement in which payments are made
when the reference rate exceeds the strike rate.

Interest rate ceiling

Related: interest rate cap.

Interest rate floor

An interest rate agreement in which payments are made when the reference rate falls
below the strike rate.

Interest rate on debt

The firm's cost of debt capital.

Interest rate parity theorem

interest rate differential between two countries is equal to the difference
between the forward foreign exchange rate and the spot rate.

Interest rate risk

The risk that a security's value changes due to a change in interest rates. For example, a
bond's price drops as interest rates rise. For a depository institution, also called funding risk, the risk that
spread income will suffer because of a change in interest rates.

Interest rate swap

A binding agreement between counterparties to exchange periodic interest payments on
some predetermined dollar principal, which is called the notional principal amount. For example, one party
will pay fixed and receive variable.

Interest subsidy

A firm's deduction of the interest payments on its debt from its Earnings before it calculates
its tax bill under current tax law.

Interest tax shield

The reduction in income taxes that results from the tax-deductibility of interest payments.

Loan amortization schedule

The schedule for repaying the interest and principal on a loan.

Low price-earnings ratio effect

The tendency of portfolios of stocks with a low price-Earnings ratio to
outperform portfolios consisting of stocks with a high price-Earnings ratio.

Negative amortization

A loan repayment schedule in which the outstanding principal balance of the loan
increases, rather than amortizing, because the scheduled monthly payments do not cover the full amount
required to amortize the loan. The unpaid interest is added to the outstanding principal, to be repaid later.

Nominal interest rate

The interest rate unadjusted for inflation.

Open interest

The total number of derivative contracts traded that not yet been liquidated either by an
offsetting derivative transaction or by delivery. Related: liquidation

Planned amortization class CMO

1) One class of CMO that carries the most stable cash flows and the
lowest prepayement risk of any class of CMO. Because of that stable cash flow, it is considered the least risky CMO.
2) A CMO bond class that stipulates cash-flow contributions to a sinking fund. With the PAC,
principal payments are directed to the sinking fund on a priority basis in accordance with a predetermined
payment schedule, with prior claim to the cash flows before other CMO classes. Similarly, cash flows
received by the trust in excess of the sinking fund requirement are also allocated to other bond classes. The
prepayment experience of the PAC is therefore very stable over a wide range of prepayment experience.

Pooling of interests

An accounting method for reporting acquisitions accomplished through the use of equity.
The combined assets of the merged entity are consolidated using book value, as opposed to the purchase
method, which uses market value. The merging entities' financial results are combined as though the two
entities have always been a single entity.

Price/earnings ratio (PE ratio)

Shows the "multiple" of Earnings at which a stock sells. Determined by dividing current
stock price by current Earnings per share (adjusted for stock splits). Earnings per share for the P/E ratio is
determined by dividing Earnings for past 12 months by the number of common shares outstanding. Higher
"multiple" means investors have higher expectations for future growth, and have bid up the stock's price.

Rate of interest

The rate, as a proportion of the principal, at which interest is computed.

Real interest rate

The rate of interest excluding the effect of inflation; that is, the rate that is earned in terms
of constant-purchasing-power dollars. interest rate expressed in terms of real goods, i.e. nominal interest rate
adjusted for inflation.

Retained earnings

Accounting Earnings that are retained by the firm for reinvestment in its operations;
Earnings that are not paid out as dividends.

Short interest

This is the total number of shares of a security that investors have borrowed, then sold in the
hope that the security will fall in value. An investor then buys back the shares and pockets the difference as profit.

Simple interest

interest calculated only on the initial investment. Related:compound interest.

Spot interest rate

interest rate fixed today on a loan that is made today. Related: forward interest rates.

Stated annual interest rate

The interest rate expressed as a per annum percentage, by which interest
payment is determined.

Times-interest-earned ratio

Earnings before interest and tax, divided by interest payments.

True interest cost

For a security such as commercial paper that is sold on a discount basis, the coupon rate
required to provide an identical return assuming a coupon-bearing instrument of like maturity that pays
interest in arrears.

Earnings per share of common stock

How much profit a company made on each share of common stock this year.

GENERAL-AND-ADMINISTRATIVE EXPENSES

What was spent to run the non-sales and non-manufacturing part of a company, such as office salaries and interest paid on loans.

OPERATING EXPENSES

The total amount that was spent to run a company this year.

RETAINED EARNINGS

Profits a company plowed back into the business over the years. Last January’s retained Earnings, plus the net income or profit that a company made this year (which is calculated on the income statement), minus dividends paid out, equals the retained Earnings balance on the balance sheet date.

SELLING EXPENSES

What was spent to run the sales part of a company, such as sales salaries, travel, meals, and lodging for salespeople, and advertising.

VARIABLE EXPENSES

Those that vary with the amount of goods you produce or sell. These may include utility bills, labor, etc.

Amortization

See depreciation, but usually in relation to assets attached to leased property.

Earnings before interest and taxes (EBIT)

The operating profit before deducting interest and tax.

Earnings before interest, taxes, depreciation and amortization (EBITDA)

The operating profit before deducting interest, tax, depreciation and amortization.

Expenses

The costs incurred in buying, making or producing goods and services.

Interest

The cost of money, received on investments or paid on borrowings.

Profit before interest and taxes (PBIT)

See EBIT.

Accrued expenses payable

expenses that have to be recorded in order for the financial statements to be accurate. Accrued expenses usually do not involve the receipt of an invoice from the company providing the goods or services.

Depreciation expense

An expense account that represents the portion of the cost of an asset that is being charged to expense during the current period.

Expenses

Costs involved in running the company.

Interest income

Income that a company receives in the form of interest, usually as the result of keeping money in interest-bearing accounts at financial institutions and the lending of money to other companies.

Interest payable

The amount of interest that is owed but has not been paid at the end of a period.

Office expense

The amount of expense incurred for the general operation of an office.

Payroll expense

The amount paid to employees for services rendered; synonymous with salary expense and wage expense.

Payroll tax expense

The amount of tax associated with salaries that an employer pays to governments (federal, state, and local).

Payroll taxes payable

The amount of payroll taxes owed to the various governments at the end of a period.

Prepaid expenses

expenses that have been paid for but have not yet been used up; examples are prepaid insurance and prepaid rent.

Rent expense

The amount of expense paid for the use of property.

Retained earnings

The residual Earnings of the company.

Salary expense

The amount paid to employees for services rendered; synonymous with payroll expense and wage expense.

Statement Retained Earnings

One of the basic financial statements; it takes the beginning balance of retained Earnings and adds net income, then subtracts dividends. The Statement of Retained Earnings is prepared for a specified period of time.

Wage expense

The amount paid to employees for services rendered; synonymous with salary expense and payroll expense.

accrued expenses payable

The account that records the short-term, noninterest-
bearing liabilities of a business that accumulate over time, such
as vacation pay owed to employees. This liability is different than
accounts payable, which is the liability account for bills that have been
received by a business from purchases on credit.

amortization

This term has two quite different meanings. First, it may
refer to the allocation to expense each period of the total cost of an
intangible asset (such as the cost of a patent purchased from the inventor)
over its useful economic life. In this sense amortization is equivalent
to depreciation, which allocates the cost of a tangible long-term operating
asset (such as a machine) over its useful economic life. Second, amortization
may refer to the gradual paydown of the principal amount of a debt.
Principal refers to the amount borrowed that has to be paid back to the
lender as opposed to interest that has to be paid for use of the principal.
Each period, a business may pay interest and also make a payment on
the principal of the loan, which reduces the principal amount of the loan,
of course. In this situation the loan is amortized, or gradually paid down.

basic earnings per share (EPS)

This important ratio equals the net
income for a period (usually one year) divided by the number capital
stock shares issued by a business corporation. This ratio is so important
for publicly owned business corporations that it is included in the daily
stock trading tables published by the Wall Street Journal, the New York
Times, and other major newspapers. Despite being a rather straightforward
concept, there are several technical problems in calculating
Earnings per share. Actually, two EPS ratios are needed for many businesses—
basic EPS, which uses the actual number of capital shares outstanding,
and diluted EPS, which takes into account additional shares of
stock that may be issued for stock options granted by a business and
other stock shares that a business is obligated to issue in the future.
Also, many businesses report not one but two net income figures—one
before extraordinary gains and losses were recorded in the period and a
second after deducting these nonrecurring gains and losses. Many business
corporations issue more than one class of capital stock, which
makes the calculation of their Earnings per share even more complicated.

diluted earnings per share (EPS)

This measure of Earnings per share
recognizes additional stock shares that may be issued in the future for
stock options and as may be required by other contracts a business has
entered into, such as convertible features in its debt securities and preferred
stock. Both basic Earnings per share and, if applicable, diluted
Earnings per share are reported by publicly owned business corporations.
Often the two EPS figures are not far apart, but in some cases the
gap is significant. Privately owned businesses do not have to report Earnings
per share. See also basic Earnings per share.

earnings before interest and income tax (EBIT)

A measure of profit that
equals sales revenue for the period minus cost-of-goods-sold expense
and all operating expenses—but before deducting interest and income
tax expenses. It is a measure of the operating profit of a business before
considering the cost of its debt capital and income tax.

earnings per share (EPS)

See basic Earnings per share and diluted Earnings per share.

fixed expenses (costs)

expenses or costs that remain the same in amount,
or fixed, over the short run and do not vary with changes in sales volume
or sales revenue or other measures of business activity. Over the
longer run, however, these costs increase or decrease as the business
grows or declines. Fixed operating costs provide capacity to carry on
operations and make sales. Fixed manufacturing overhead costs provide
production capacity. Fixed expenses are a key pivot point for the analysis
of profit behavior, especially for determining the breakeven point and for
analyzing strategies to improve profit performance.

net income (also called the bottom line, earnings, net earnings, and net

operating Earnings)
This key figure equals sales revenue for a period
less all expenses for the period; also, any extraordinary gains and losses
for the period are included in this final profit figure. Everything is taken
into account to arrive at net income, which is popularly called the bottom
line. Net income is clearly the single most important number in business
financial reports.

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