Why Does Warren Buffett Prefer Ebit Multiples To Ebitda Multiples?

1.	Why Does Warren Buffett Prefer Ebit Multiples To Ebitda Multiples?
Answer» Warren Buffett once famously said, "Does management THINK the tooth fairy pays for capital expenditures" He dislikes EBITDA because it excludes the OFTEN sizable Capital Expenditures companies make and HIDES how much cash they are ACTUALLY using to finance their operations. In some industries there is also a large GAP between EBIT and EBITDA - anything that is very capital-intensive, for example, will show a big disparity. Warren Buffett once famously said, "Does management think the tooth fairy pays for capital expenditures" He dislikes EBITDA because it excludes the often sizable Capital Expenditures companies make and hides how much cash they are actually using to finance their operations. In some industries there is also a large gap between EBIT and EBITDA - anything that is very capital-intensive, for example, will show a big disparity.

Answer»

Warren Buffett once famously said, "Does management THINK the tooth fairy pays for capital expenditures"

He dislikes EBITDA because it excludes the OFTEN sizable Capital Expenditures companies make and HIDES how much cash they are ACTUALLY using to finance their operations.

In some industries there is also a large GAP between EBIT and EBITDA - anything that is very capital-intensive, for example, will show a big disparity.

Warren Buffett once famously said, "Does management think the tooth fairy pays for capital expenditures"

He dislikes EBITDA because it excludes the often sizable Capital Expenditures companies make and hides how much cash they are actually using to finance their operations.

In some industries there is also a large gap between EBIT and EBITDA - anything that is very capital-intensive, for example, will show a big disparity.

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