Fuzzy Ebitda Math That Fueled Junk Debt Boom Is Sparking Jitters

The video discusses EBITDA, a financial metric popularized in the 1980s, used to assess a company's cash-generating ability. However, it doesn't account for capital investments and debt, leading to potential manipulation. Examples include Exela Technologies and WeWork, which used adjusted EBITDA to present a more favorable financial picture. Critics argue that such practices obscure the true financial health of companies, affecting the junk bond market and creating a false sense of security.

What is the primary focus of EBITDA as a financial metric?

• Evaluating a company's stock performance

• Assessing a company's cash-generating ability

• Determining a company's tax obligations

• Measuring a company's market share

How did Exela Technologies present its financial performance to investors?

• By showing a net profit under GAAP

• By using a further Adjusted EBITDA

• By highlighting its market expansion

• By focusing on its tax savings

What was the financial impact of WeWork's use of Community Adjusted EBITDA?

• It improved their stock price

• It reduced their tax liabilities

• It turned a loss into positive earnings

• It increased their market share

What concern do critics have about the use of adjusted EBITDA metrics?

• They could blur the true financial health of companies

• They may lead to higher taxes

• They might increase market competition

• They could result in lower stock prices

What is a potential risk associated with the use of adjusted EBITDA in the junk bond market?

• It may lead to higher interest rates

• It could create a false sense of security

• It might increase bond prices

• It could reduce bond availability