Profitability Metrics

What this video covers

• Why extraordinary items (unusual AND infrequent) and nonrecurring items (one-time charges) must be stripped out before computing any clean run-rate metric
• How EBIT, EBITDA, and EBITDAR each peel away a different layer of noise, and when the R for rent is required to compare leased-asset operators with owned-asset operators
• The exam trap that EBITDA is not cash flow because it ignores working capital changes, capital expenditures (CapEx), and actual interest and taxes paid
• How EPS, earnings yield, and equity turnover translate bottom-line earnings into shareholder-focused terms
• The margin stack from top to bottom: gross margin, operating margin, pre-tax margin, and net margin, and what each layer reveals about cost discipline and financing choices
• Why ROA uses total assets, ROE uses stockholders' equity only, and how borrowed capital amplifies ROE even when ROA is mediocre
• Why ROIC is the gold standard for cross-company comparison: NOPAT (net operating profit after tax) in the numerator and invested capital (debt plus equity) in the denominator strips out the financing mix entirely