I just read about what EBITDA is and found out that Warren Buffett really doesn't like this number, which is actually quite interesting because many people still use it in company analysis.

First of all, what is EBITDA? Simply put, it is Earnings Before Interest, Tax, Depreciation, and Amortization, or in other words, the cash profit from operations that excludes interest, taxes, depreciation, and amortization expenses. This makes companies like Tesla, SEA Group, and various startups in growth phases tend to report this figure often.

Why are investors interested in what EBITDA is and why do they use it for decision-making? Because it helps clearly show a company's ability to generate profit without worrying about accounting policies or different tax structures. If Company A has a higher EBITDA than Company B, it means it can generate profit before deducting expenses better, making it excellent for comparing companies within the same industry.

But what to watch out for is that the EBITDA figure that looks good may not reflect the full reality because it doesn't account for many expenses. Even a loss-making company can have a positive EBITDA. Additionally, calculating EBITDA can have issues—if a company has a lot of debt or increased expenses, the EBITDA figure might be misleading.

The calculation method is straightforward: EBITDA equals profit before tax plus financial costs, plus depreciation, plus amortization. Most companies don't show EBITDA directly in their regular financial statements but include it in annual reports. If not, you can calculate it yourself.

For using EBITDA, what’s good is to assess the company's debt-paying ability—higher is better. But it should be used over a short period, about 1-2 years; it’s not suitable for long-term analysis. A good EBITDA margin should be over 10%, indicating the company can profit efficiently.

Compared to Operating Income, EBITDA doesn't deduct depreciation and amortization, whereas Operating Income does, so Operating Income tends to reflect the true picture more accurately.

A key caution is that EBITDA is a manipulated figure; companies can make it look better than reality. It also doesn't truly reflect the company's liquidity and doesn't necessarily indicate the company's real strength because the expenses added back are actual costs that must be paid.

In summary, what is EBITDA? It’s a useful tool but must be used carefully. It shouldn't be the sole metric; it should be considered alongside other figures like Operating Income, Free Cash Flow, and other factors to make good investment decisions. That’s why Buffett doesn’t like it—that’s the reason.