EBITDA vs EBIT vs Net Income Explained Simply

EBITDA, EBIT, Free Cash Flow, Net Income. What's the difference? 🚀 Take our Complete Finance & Valuation Course: https://www.careerprinciples.com/cour... In this video we go over EBITDA, EBIT, Net Income, and Free Cash Flow, explaining what each of these concepts mean, and how to calculate them. For this, we use Amazon's real income statement and cash flow statement from their annual report as an example. We also use hypothetical examples comparing 2 companies with different taxes, different debt levels, and different depreciation schedules to assess how EBITDA, EBIT, and net income vary. To summarize the content covered, net income reflects total profit after all expenses, but investors often find it misleading due to tax and interest effects. EBIT removes those distortions by focusing on core operations, while EBITDA goes further by also excluding non-cash items like depreciation and amortization. This allows for fairer comparisons between companies with different tax rates, debt levels, or asset bases. However, Warren Buffett criticizes EBITDA for ignoring real costs like depreciation, arguing it can paint an overly optimistic view of profitability. Instead, he prefers Free Cash Flow—operating cash flow minus capital expenditures—as it better reflects the true cash-generating ability of a business and supports his belief that a company’s value lies in the cash it can generate over time. LEARN: 👉 Excel for Business & Finance Course: https://www.careerprinciples.com/cour... 🔥Power BI for Business Analytics: https://www.careerprinciples.com/cour... 🚀 All our courses: https://www.careerprinciples.com/all-... ▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬▬ Chapters: 0:00​ -​ Definitions (EBIT, EBITDA, Net Income) 3:34​ - Effect of Taxes 4:31​ - Effect of Debt 5:15​ - EBITDA 7:28​ - Warren Buffett vs EBITDA 8:24​ - Free Cash Flow