Capex spending



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How does Capex spending effect EBIDTA .

2 Answer(s)


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1.EBITDA is nothing but operational profitability of a company.

2.CAPEX as such doesnot have any impact on EBITDA.As the name suggests EBITDA means Earnings before interest,taxes,DEPRECIATION and amortization.

3.CAPEX gets reflected in Income Statement through Depreciation.But EBITDA is before Depreciation.

4.That is why there are arguments saying that EBITDA is not a very good metric in comparing the financials of 2 or more companies.

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Hari is right. Capex has no direct impact on EBITDA.

Capex is manifested in the income statement through Depreciation. Hence Capex has an impact on EBIT.

Higher the Capex, higher the depreciation and hence lower the EBIT / profitability.

The amount of depreciation is determined by the depreciation policy that the company is following.