Question

A question on Financial analysis

What do the following EBITDA numbers tell over the 5 year period Yr 1 -205,300, Yr 2 - 25,200, Yr 3 - 189,000, Yr 4 - 290,000, Yr 5 - 240,000

Answer 1

EBITDA roughly estimates the operating cash flow for the firm as it precedes the depreciation and amortization deduction in the income statement.

As seen from the trend, the operating cash flow had dipped from Yr 1 to Yr 2 and it could be due to variety of reasons on the business front. Either the sales have not reached an expected level or the costs might have escalated. However from Yr 3, there has been a steady increase in the operating profits/cash flow with a slight dip in Yr 5 . In Yr 3 , the operating cash flows have shown an exponential growth to Yr 4. The operating cash flow figure in Yr 2 needs to be further scrutinized as it seems to be just a one period problem.