Equipped with an MBA from the Pacific Lutheran University and a Human Resource Certificate from Cornell University, Yasser Josue Brenes serves as the Area President for the South Area for Republic Services, Inc based out of Houston, TX. He oversees one of the ten Areas of the company’s field operations and is responsible for overseeing a $ 1.5 Billion in annual revenue. Another critical facet Yasser J. Brenes manages is optimizing the company’s return on net operating assets and the earnings before interest, taxes, depreciation, and amortization (EBITDA).
EBITDA is a useful tool and indicator of a company’s financial health and performance and comparing baseline between two similarly sized companies in the same niche. To get the company’s EBITDA, you add the earnings, interest, taxes, depreciation, and amortization.
However, different approaches yield diverse figures as finance and business analysts, executives and investors use two ways to calculate EBITDA-either the operating or the net income.
Firstly, when using the operating income formula, you utilize the company’s profit after deducting operating expenses such as wages and day-to-day expenses without including any taxes or interest on short and long-term debts. Add the result to the depreciation and amortization costs to get the EBITDA. Sometimes the two are already included in the operating expenses.
The second formula using the net income includes the taxes and interest in the total operational expenses. Add the depreciation and amortization to calculate the EBITDA. In this instance, part of the expenses includes one-time expenditures or non-operating income.
The choice between the two formulas depends on the nature of the business. Ignoring the interest figure-as is in the operating income formula- for companies with large loans yield a higher EBITDA- thus a deceiving figure for an investor. In the same vein, ignoring the depreciation figure for a company with a large asset base, such as heavy construction machinery, makes an unprofitable company seem financially attractive.
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