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"Worldly wisdom teaches us that it is far better for reputation to fail conventionally than to succeed unconventionally." - John Maynard Keynes We are ok being lonely and taking an unconventional approach to investing, for that is where we find the greatest long-term success. Although... More
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  • EBITDA Expect Before Investing To Dare Assumptions 3 comments
    Feb 10, 2014 10:12 AM

    "Does management think the tooth fairy pays for capital expenditures?" - Warren Buffett

    "I think that, every time you saw the word EBITDA, you should substitute the word "bullshit" earnings."- Charlie Munger

    We've always been amused by Warren Buffett and Charlie Munger's commentary on how things are just blindly followed on Wall Street. One particular financial metric, EBITDA (Earnings Before Interest Tax Depreciation and Amortization), has been often used by analysts and companies when in correspondence with shareholders. Although EBITDA does have its positives as being a "quick and dirty" proxy of cash flow, debt coverage, and operational comparability, the two great investors remind us that EBITDA has its drawbacks. We should be weary of companies that put a strong emphasis on this financial metric because they are either up to something or trying to perform slight of hand tricks on investors. We feel that investors can benefit more from our acronym of EBITDA which is Expect Before Investing To Dare Assumptions.

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Comments (3)
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  • As soon as I read the title, Charlie Munger's quote came to mind. In fact I said it out loud. My dog gave me a funny look since he is the only one home to hear me.
    10 Feb, 03:05 PM Reply Like
  • Author’s reply » Drew,

     

    You have a smart dog. My dog generally cares less when I'm reading and mumbling stuff. He'd rather make funny faces and talk when I sing or play guitar.
    10 Feb, 05:08 PM Reply Like
  • UCW & Drew

     

    Nice acronym.
    Reminds me of another accounting term, Generally Accepted Accounting Principles-GAAP. My accountaint always referred to them as Commonly Reported Accounting Principles (CRAP). Not quite the same as EBITDA but still just as important.

     

    Your dogs seem to have talent as well.
    I did have a cat for 15 yrs. Best alarm clock I ever had. Even when I was out of town, he would wake my wife up. Never could teach him how to dial long distance.
    13 Feb, 09:55 PM Reply Like
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