NISM Series XV : Research Analyst Certification Exam Notes
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Amortization is the term used for depreciation of intangible assets such as copyrights and brands. While depreciation or amortization is shown as an expense in the P/L account, there is no actual cash outflow on account of this expense each year. The expense has been met upfront when the asset is bought. Deducting Depreciation/ Amortization from EBITDA gives us EBIT
Other Income: This is recurring income from other sources such as rent, interest, dividend, commission etc. It should at best be small portion of the Net revenues of the company. If this income is quite high in comparison to sales, it warrants analysis of the business model of the company
Profit Before Tax (PBT): Deducting Interest and Depreciation/Amortization from EBITDA and then adding other income to it gives us the total profit of the company for the period after meeting all the expenses. Taxes need to be paid on this profit and hence it is known as PBT.
Profit After Tax (PAT): This is the final residual amount which remains with the company after paying all its stakeholders other than shareholders.
Basics of Balance Sheet (B/S) - A Balance Sheet contains the sources of funds for a company and application of those funds at any point of time. As is logical, sources of funds and their application must match at aggregate level, hence, both the sides of the balance sheet must match at all times (as also the name suggests)
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