The importance of EBIT- EBITDA disclosure in annual reports: A comparison from Turkey

Year 2017, Volume: 3 Issue: 2, 397 - 405, 31.01.2017

Burcu Adiloglu Bengu Vuran

https://doi.org/10.24289/ijsser.284252

Cited By: 3

Abstract

Financial
statement analysis is the process of reviewing and
analyzing a company's financial statements to make better economic decisions. When
analyzing company’s financial performance and calculating some ratios it is better
to use EBIT (Earnings Before Interest and Taxes) information rather than net income.  This is a measure of a firm's profit that includes all expenses except
interest and income tax expenses.  It
is the difference between operating revenues and operating expenses. This is an
important factor contributing to the widespread use of EBIT is the way in which
it nulls the effects of the different capital structures and tax rates used by
different companies. By excluding both taxes and interest expenses, the figure
honest in on the company's ability to profit and thus makes for easier
cross-company comparisons. EBITDA (Earnings Before Interest, Taxes,
Depreciation and Amortization) is also popular among highly leveraged and
capital-intensive firms that require lots of depreciation calculations, such as
utilities or telecommunications companies. This is because these firms have
high depreciation rates and large interest payments on debt, often leaving them
with negative earnings. In this study evolution of EBIT and EBITDA disclosure
in the financial data part of the annual reports of companies listed in BIST 50
(Borsa Istanbul) is investigated by comparing the year 2010 and year 2015
information.

Keywords

Financial statements, financial statement analysis, EBIT, EBITDA, BIST

References

• Borsa Istanbul, http://www.borsaistanbul.com/
• Friedlob, G. T., Plewa Jr., F. J., (1983), Understanding return on investments, Wiley-Blackwell.
• Powers, M., Needles, B, Crosson S., (2014) Principles of accounting, South-Western Cengage Learning.
• Weil S.H, Noi F.,(2001), Introductory accounting skills: for financial and management accounting students, Juta and Company Ltd.