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Waste-to-Energy Investment Evaluation (WTE Tool)
Published in Efstratios N. Kalogirou, Waste-to-Energy Technologies and Global Applications, 2017
Having calculated annual revenues and operating expenses, the earnings before interest, taxes, depreciation, and amortization (EBITDA) are calculated. By subtracting all other financial and tax considerations (depreciation, interest payments, taxes, etc.), which are out of scope for this book, net profit is calculated. Net profit, or net income, is actually an accounting figure that does not represent real cash flow generated. Other capital expenses that are not recorded on an income statement influence available cash for the investor. Starting from net income, noncash expenses should be added up (such as depreciation), while capital expenses should be subtracted (such as change in working capital, capital expenditures, debt capital repayment, etc.), in order to reach free cash flow to equity (FCFE). FCFE is actually the amount of cash produced per year that is available to the investor. This cash flow would repay the investor's initial capital investment during the first years and, after that, the remaining cash flow in later years would represent return on investment (ROI). The most important figures for an investor are when the capital invested is to be paid back, and what the ROI will be. The main figures for investment evaluation are discussed below.
Costing and cost allocation methods
Published in Peter White, Public Transport, 2017
These charges are often influenced by the capital structure of the business and historical factors rather than the current assets employed. Publicly-owned businesses were generally financed through loans, interest on which has been treated as a ‘cost’. Conversely, a private company financed entirely through equity (‘dividend’) capital, would not incur such a ‘cost’, but be able to regard all its surplus, after covering operating costs, depreciation and taxation, as ‘profit’. Thus, in comparing profitability of businesses one should assess carefully their capital structure. A distinction may be drawn between EBITDA (Earnings before Interest, Taxation, Depreciation and Amortisation) – in effect, the operating surplus – and measures of net profitability after allowing for these items, such as EBIT (Earnings before Interest and Taxation).
Value Stream Costing
Published in MJS Bindra, Ekroop Kaur, The Lean Business Guidebook, 2022
Contribution 1 is the difference between sales value of the month’s production and cost of material used in this production. Contribution 2 is derived by reducing actual variable costs incurred that month from contribution 1. If fixed costs, including corporate office expenses, are reduced from contribution 2, EBITDA (Earnings Before interest, Taxation, Depreciation and Amortization) is derived and deduct depreciation for the month to derive EBIT (Earnings Before Interest and Taxation) and interest (short term and long term) to derive EBT (Earnings Before Tax) or PBT (Profit Before Tax).
M&As and determinants of financial multiples in shipping: the European ro-pax and ferry market
Published in Maritime Policy & Management, 2023
G. Satta, F. Avallone, L. Persico, F. Parola, F. Vitellaro, C. Di Fabio
Managers, analysts and interested stakeholders traditionally employ economic and financial key performance indicators (KPIs) to assess the economic and financial performance of shipping companies (Kang et al. 2016). The most diffused economic KPIs are Return on Assets (ROA), return on Capital Employed (ROCE), Return on Equity (ROE), and EBITDA Margin (Stopford 2009). The latter is often used as a proxy for measuring the profitability of shipping companies (Panayides, Gong, and Lambertides 2013). Indeed, the EBITDA margin does not consider extraordinary items of profit and loss account as well as the economic implications of corporate finance decisions. In other words, it is not affected by bias from earnings management practices that are typically used in the shipping industry for altering amortization and depreciation costs related to the fleet (Kavussanos and Visvikis 2016 Alexandridis et al., 2018). As the EBITDA margin is widely considered a good predictor of long-term corporate performance, the fifth research hypothesis is the following: