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Bank Closed Saturday, February 8

Great news! Peoples is changing processes and upgrading equipment to better serve you—our bank customers. We’ll be open for normal bank hours on Monday, February 10.

Peoples State Bank will be closed on Monday, February 17. 
We're executing our winning strategy to further our education, empower our staff and better serve you - our bank customers. We will open as usual Tuesday, February 18.

Bank Closed Saturday, February 8

Great news! Peoples is changing processes and upgrading equipment to better serve you—our bank customers. We’ll be open for normal bank hours on Monday, February 10.

Peoples State Bank will be closed on Monday, February 17. 
We're executing our winning strategy to further our education, empower our staff and better serve you - our bank customers. We will open as usual Tuesday, February 18.

Peoples State Bank

Using EBITDA to Calculate Your Company’s Value

Focusing on Your Operating Decisions
  • Business
  • December 05, 2019
  • Seth Wage

There are many methods to calculate a company’s value. Financial institutions often use EBITDA, which is short for Earnings Before Interest, Taxes, Depreciation, and Amortization. The benefit for using EBITDA is it is a measure of profits, without factoring in financing decisions, accounting decisions, and tax environments.

EBITDA allows analysts to focus on the outcome of operating decisions while excluding the impacts of non-operating decisions like interest expenses, tax rates, or large non-cash items like depreciation and amortization. By minimizing the non-operating effects that are unique to each company, EBITDA allows analysts to focus on operating profitability as a singular measure of performance. This is important when comparing similar companies across a single industry, or companies operating in different tax brackets.

To calculate your company’s EBITDA, start by reviewing your company’s income statement. We’ll use a fictional company to demonstrate.

Company ABC’s Annual Income Statement

Revenue                                                          $2,000,000

Operating Expenses

            Salaries                                               ($1,000,000)

            Rent                                                    ($500,000)

            Amortization                                        ($25,000)

            Depreciation                                        ($75,000)

Operating Income                                             $400,000

Interest Expense                                              ($50,000)

Net Income                                                                $350,000

In this example, it’s easy to see the first half of the EBITDA calculation by looking at the operating income line, which shows $400,000 for Company ABC. Then, add back in the depreciation expense of $75,000 and the amortization expense of $25,000, which means the EBITDA for Company ABC is $500,000. 

You could also start from the bottom of this example, adding interest, depreciation, and amortization to the net income amount of $350,000, getting you back to the $500,000 EBITDA figure.

Seth Wage
  • Commercial Banker

Seth is an experienced banker working with business customers at Peoples State Bank. Seth meets and works with customers to help them with their banking needs.