Firms often provide supplemental disclosures that report and discuss income figures that do not necessarily equal bottom-line net income from the income statement. For example, in Twitter’s initial public offering filings with the SEC, the company reported a net loss of $79.4 million, but prominently disclosed “adjusted EBITDA” of (positive) $21.2 million. Discuss the merits and shortcomings of this managerial practice.

Firms often provide supplemental disclosures that report and discuss income figures that do not necessarily equal bottom-line net income from the income statement. For example, in Twitter’s initial public offering filings with the SEC, the company reported a net loss of $79.4 million, but prominently disclosed “adjusted EBITDA” of (positive) $21.2 million. Discuss the merits and shortcomings of this managerial practice.

Financial Reporting, Financial Statement Analysis and Valuation

8th Edition

ISBN:9781285190907

Author:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Publisher:James M. Wahlen, Stephen P. Baginski, Mark Bradshaw

Chapter4: Profitability Analysis

Section: Chapter Questions

Problem 3QE

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Firms often provide supplemental disclosures that report and discuss income figures that do not necessarily equal bottom-line net income from the income statement. For example, in Twitter’s initial public offering filings with the SEC, the company reported a net loss of $79.4 million, but prominently disclosed “adjusted EBITDA” of (positive) $21.2 million. Discuss the merits and shortcomings of this managerial practice. Please, don't copy the answer from the book, explain with your words.
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