PROFIT MARGINS

EBITDA is Earnings before Interest, Tax, Depreciation and Amortization. Management can manipulate their bottom line by changing the depreciation rates. Moreover, manufacturing companies generally have higher depreciation figure as against service companies. Financing decisions can affect the effective tax rate paid by a company. These factors are a constraint to a meaningful comparative analysis of a company with its competitors and other industry players. Hence, EBITDA margin is a good measure for comparing companies across different industries.