Biz Concepts

What is EBITDA?

WHAT IS EBITDA? EBITDA is a measure of profitability and is used to evaluate a company’s financial performance. It is used frequently by analysts and investors as an alternative to looking at net income/earnings because the metric focuses on the profitability of a company’s core operations. It dials in on the operations by stripping out the effects of non-operating items such …

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What is Depreciation?

Depreciation is an accounting method used to allocate the cost of a tangible asset over the course of its lifespan. Assets subject to depreciation have a lifespan (or useful life in accounting language) greater than one year. Examples include: Machinery Buildings Furniture Depreciation expense reduces an asset’s book value with each passing year. This reduction represents the asset’s decline …

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What is Payback Period?

Payback period is the amount of time needed for the cash flows of an investment to recover the amount initially invested into an asset. It is a measure of liquidity that is commonly used in capital budgeting and shorter payback periods are associated with more attractive projects. Simply put, if you spent $100,000 as an initial outlay …

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What is IRR?

IRR, short for internal rate of return, is a metric used to show the profitability of a potential project or investment. Companies use it in capital budgeting when deciding where to invest their money and IRR is frequently used in the real estate industry to evaluate an investment. In addition to projects, IRR can be calculated …

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