'E Bit What?

Physician's Money Digest, October15 2003, Volume 10, Issue 19

A popular, if questionable, way toevaluate a company's profit strength isEBITDA, an acronym for "earningsbefore interest, taxes, depreciation, andamortization." Although some WallStreet wits say it really means "earningsbefore I fooled the dumb accountants,"many companies like using EBITDAbecause it almost always makes theirprofit picture look a bit rosier. Physician-investorsshould be skeptical about usingEBITDA numbers, financial experts say,because there are just too many ways tomassage the data to make a company'sbottom line look better. Cash-flowanalysis is a much more accurate measureof a company's earnings potential.