Beyond the human toll that the pandemic has had on our lives,
the COVID-19 virus, as well as our and our governments'
responses to it, has had a marked economic impact. Many businesses
have faced challenges and it is fair to expect that in a number of
cases, earnings will have been affected in a material way. As
entities look to report on the past year, it's worth
considering how we calculate the impact of the pandemic on
earnings.
EBITDA (earnings before interest, tax, depreciation and
amortization) is the most commonly used stand-in for earnings and
can be found in a wide array of agreements, from the financial
covenants contained in loan documents, through earn-outs in M&A
agreements, employment remuneration terms and long-term incentive
plan awards, to pricing formulae in options and other contingent
rights.
