Yellow Belt in Lean Six Sigma

Thiago has a degree in Production Engineering, a graduate course in statistics and a degree in administration from the Federal University of Juiz de Fora (UFJF). Black Belt in Lean Six Sigma, worked with methodologies for cost reduction and process optimization at Votorantim Metais, subsequently joining MRS Logística as a trainee, where he held positions of manager and specialist in continuous improvement. With Microsoft Office Specialist (MOS) certification and ISO 9001 Auditor Lead Advisor, attended several companies in consulting projects, in addition to training and lectures related to Lean Six Sigma, Career Entrepreneurship in nationally renowned congresses such as ENEGEP (National Meeting of Production Engineering) and international as International Six Sigma Brazil congress. In the academic environment, he works as a professor of undergraduate and graduate courses in the areas of management and entrepreneurship. Thiago had the opportunity to participate in projects of several segments. Founder of the Voitto Group, he was selected in the Promessas Endeavor Program, having the opportunity to receive valuable mentoring to accelerate his business. He is currently a business mentor and dedicates himself to the executive front of Voitto, carrying with his team the vision of being the best online school of management in Brazil.

Founder of Voitto Group, currently a business mentor and dedicated to the executive front of Voitto, carrying with his team the vision of being the best online business school in Brazil.

See how to use EBITDA to compare the results of a company's operating activities with those of other companies in the same segment.

What is EBITDA? See how to calculate it and when to use it!

How to measure whether a company is profitable? Often, if we look only at a company&#39;s bottom line, we may misinterpret the profitability of the company. Therefore, EBITDA will be very important in this analysis. Want to know how EBITDA will help you in this analysis? So check out the topics you&#39;ll see in this article:<ul><li>What is EBITDA?</li><li>How to calculate EBITDA?</li><li>Why calculate EBITDA?</li><li>Beware of using EBITDA</li><li>What is the difference between EBITDA and EBIT?</li><li>What is EBITDA margin?</li></ul><h2>What is EBITDA?</h2>The acronym EBITDA stands for Earnings Before Interest, Taxes, Depreciation and Amortization. EBITDA is an indicator of profitability that represents how much the company is generating cash. And why is it important to know this? Simple, because when someone invests money in an organization, they want to make sure that the company can pay their debts.<h2>How to calculate EBITDA?</h2>To facilitate the understanding of the calculation of EBITDA, nothing better than an example, right? So let&#39;s create one. Imagine that a subsidiary of Wayne Enterprises obtained the following data in the P&amp;L:<ul><li>Net Revenue: $ 50,000.00</li><li>Cost of sold goods: $ 4,729.42</li><li>Selling expenses: $ 5,365.20</li><li>General expenses: $ 2,341.58</li><li>Administrative expenses: $ 1,120.30</li><li>Depreciation: $ 500.00</li><li>Amortization: $ 1,000.00</li></ul>To calculate EBITDA, we only take from Net Revenue and subtract expenses, except Depreciation and Amortization. Thus, we have: EBITDA = 50,000.00 - (4,729.42 + 5,365.20 + 2,341.58 + 1,120.30) = $ 36,443.50 We could calculate otherwise as well. For example, if we had been given Operational Profit, which is Net Revenue minus all expenses, we would just add Depreciation and Amortization again. As we can see from the result obtained in the calculation of EBITDA, this subsidiary is being profitable.Lean Six Sigma is a methodology that seeks to increase the profitability of companies through the improvement of their processes.Thinking about you and your career, we, at Think Lean Six Sigma, created a FREE Yellow Belt training in Lean Six Sigma.In this training, we will introduce you to the DMAIC method and all its 5 steps, namely: &quot;Define, Measure, Analyze, Improve and Control.With this course, you will be able to develop small improvement projects within your area of expertise and work with Green Belts and Black Belts in support of the Lean Six Sigma program.Have you ever thought about being the agent of change within your organization? Click on the image below for more information and become a Yellow Belt, for FREE!<a target="_blank" rel="nofollow" href="https://thinkleansixsigma.thinkific.com/courses/yellow-belt"> <Image quality="95" src="https://images.prismic.io/voitto-blog/a15bb1c1-c46d-4d66-b63f-6dac9a3c724e_Bot%C3%A3o+Lateral+-+Cursos+TLSS+%284%29.png" width="500" height="500" alt="Yellow Belt in Lean Six Sigma" title="Yellow Belt in Lean Six Sigma"/></a><h2>Why calculate EBITDA?</h2>Why withdraw interest, taxes, depreciation and amortization of the account? Because they do not really reflect how much the company generates cash. Did not understand? So, let me explain in a simpler way. We take interest out because it depends on how much is being invested and the structure of the investment. As for taxes, they depend on where the company is located. Depreciation and amortization, on the other hand, depends on the decisions made by the company in its investments and not on its actual operations. By removing all this, we will only be left with those expenses involved in the operations of the organization. And that is how we identify whether the company is profitable or not. If we look only at net income, we may get a wrong view of this profitability. With the calculation of EBITDA, we have a greater leveling among companies at an international level, because there are differences in tax laws and also different formulas for the calculation of depreciation and amortization. In addition, it is also useful for measuring the performance of indebted companies, as the amounts paid with charge can greatly reduce or even result in loss. It is also important to take into consideration that a negative EBITDA means that the company is not profitable, but this does not necessarily imply a loss, since it can receive investment capital. We should be careful about a positive EBITDA value as well, as it can actually hide a loss caused for example by non-paying customers or unpaid expenses by the company. Therefore, it is advisable to always use EBITDA together with other financial indicators.<h2>Beware of using EBITDA</h2>As we have already said in this article, great care must be taken when conducting a financial analysis of a company based only on EBITDA, because companies can mask poor results through this indicator. The American economist and investor Warren Buffet, president of Berkshire Hathaway, says:&quot;It amazes me how widespread the use of EBITDA has become. People try to mask financial statements with this.We will not buy (stock) in companies where someone is talking about EBITDA. If you look at all the companies and divide them into companies that use EBITDA as a metric and those that do not use it, I suspect you will find many more frauds in the first group.Look at companies like Wal-Mart, GE and Microsoft - they will never use EBITDA in their annual report. &quot; Do you understand the danger of it? Let me explain. Although Depreciation and Amortization are not actually cash outflows, both have a large impact, in most cases, on the company&#39;s results. As an example imagine a company that has no assets other than several factories in its asset, plant, and equipment asset account. Of course, over time, these factories would lose value as they age and are used. Using EBITDA as a means of valuing this company would be totally incoherent since it would not take into account the loss of value that the factories are experiencing. Making use of EBITDA, in this case, would exaggerate the company&#39;s earnings and thereby exaggerate its value.<h2>What is the difference between EBITDA and EBIT?</h2>These two indicators are often confused, but each one has its particularities and applications. EBIT stands for Earnings Before Interest and Taxes, that is, for the calculation of this indicator, Depreciation and Amortization are taken into account. Considering EBIT we find out what is the actual book earnings of a company, excluding financial results. EBITDA focuses on raising values ??that directly affect the company&#39;s cash flow. Therefore, we can not say which is the best indicator, what we can say is which indicator is more appropriate for each situation and apply it to obtain the desired information.<h2>What is EBITDA margin?</h2>The EBITDA margin is the ratio between EBITDA and total revenue. So, we have the following formula: EBITDA Margin = EBITDA / Total Revenue The EBITDA margin metric is important because it is through it that a company can compare its financial performance with the average of the market segment in which it operates. Therefore, it is possible to make better accounting decisions in the future.

See how to calculate a company's EBITDA and in which situations to use this indicator

Understand what EBITDA is, how to calculate it and how this indicator can be used to measure a company's productivity.