The classic phrase is "EBITDA", or "earnings before interest, taxes, depreciation, and amortization". This is sometimes referred to as "earnings before all the bad stuff". Then there are "extraordinary items", which somehow are always in the direction that makes the balance sheet look better.
In the days when AOL sent out disks with their program, it came out years later that they were treating that marketing effort as a capital expense and amortizing those throwaway disks over many years. AOL actually became profitable about six years after it said it did.
I used to have a system which tried to analyze financial statements automatically. I have a database of several hundred euphemisms for "net loss". ("Net income after extraordinary item", etc.) It's embarrassing. The SEC's standardization on XBRL has helped a little with that.
Tesla is an industrial company, and accounting for industrial companies is well understood. This includes growing industrial companies. Upfront expenditures for an industrial company result in real assets, which can be valued. I look forward to reading the prospectus for the IPO.
That's not really correct. EBITDA is not earnings before bad stuff - that stuff is all % of your income and/or write downs that have no impact to the business, so financial folks like to exclude it as noise (since all it really does is reduce your taxes). Examples:
- You bought a company and now it's worthless
- You made money and now you have to pay taxes on it
- You bought a bunch of computers and now they're three years old and worth less than when you bought them
- You bought something 10 years ago, and, instead of paying for it all up front, you paid over time
In the days when AOL sent out disks with their program, it came out years later that they were treating that marketing effort as a capital expense and amortizing those throwaway disks over many years. AOL actually became profitable about six years after it said it did.
I used to have a system which tried to analyze financial statements automatically. I have a database of several hundred euphemisms for "net loss". ("Net income after extraordinary item", etc.) It's embarrassing. The SEC's standardization on XBRL has helped a little with that.
Tesla is an industrial company, and accounting for industrial companies is well understood. This includes growing industrial companies. Upfront expenditures for an industrial company result in real assets, which can be valued. I look forward to reading the prospectus for the IPO.