This is a good explanation, but leaves the reader with the question of what are the emerging guidelines or trends for reporting income given a new set of economic circumstances. When shareholders are interested in their companies sustainability and long-term ability to generate value for their stakeholders, what is the emerging acronym to look for? What should we look for when a companies very survival is at stake?

Well, indeed the figure represents the underlying ability to earn money but as it is fraught with possibilities of manipulation due to management choices of accounting policies, a much more useful term is Cashflow from Operations (CFO) that reflects much better the "quality of profits" being earned as the impact of subjectivity and accounting policies is generally taken out of the equation.

Indexing the CFO to EBITDA over the years can determine a pattern as to if the accounting policies are being too aggressive or convervative.

Admittedly, the above would be quite difficult to decode for the young audience that was the subject of the article in the first instance....

EBITDA is a meaningless line item used primarily to justify why a company is not profitable for the following reasons:

1. Too much debt (interest expense).

2. Substantial capital expenditures for equipment and other intellectual property (depreciation and amortization expense).

The cash flow statement is the most informative finacial statement in my opinion. I place very little stock in the income statement of any publicly traded company because it is prepared using accrual accounting.

Cash is and will always be king.John Folson, CPA, P.A.

Why is the media not talking about the April, 2009 U. S. Geological Survey report that says that the Hakken Oil Field/Formation in North Dakota has over 410 Billion Barrels of recoverable oil. More than Saudi Arabia but no media coverage. This report estimates the cost of recovery is $16 per barrel to produce. But there is no rush to develop.

The American people are idiots if they think the oil industry is producing all the oil they can. Federal oil leases let oil companies extend, extend, and extend federal oil leases without drilling one well. Over 60 millions Federal acres are currently under lease with no drilling. The American people are being ripped off every time a Federal oil lease is signed and everytime they fill up their gas tanks.

By the way, IRS Code Section 613 means that the Federal government is providing Tax Subsidies to the Oil Industry, Coal Industry, Iron Ore Industry, Gas Industry, etc. Another Code section subsidizes Acher Daniel Midland's production of HFCS (High Fuctose Corn Syrup) the sweetener that is making American's FAT and an important cause of diabetes.