Tracy Byrnes
Editor's note: Welcome to "Booyah Breakdown," an explanation of certain terms and topics Jim Cramer discusses on his "Mad Money" TV show. Feel free to ask a question if you're confused about something Cramer talks about, but please keep in mind that we do not provide advice on specific stocks.
I'm new to investing and have been educating myself with the help of your articles. I would like to know what "EBITDA," "ttm," and "yoy" on the financial sheets mean. -- B.K. OK. Here's your acronym lesson: EBITDA stands for "earnings before interest, taxes, depreciation and amortization." Many analysts use EBITDA to compare the profitability between companies, arguing that it eliminates the effects of the financing and accounting decisions. They claim that interest, taxes, depreciation and amortization don't have anything to do with the nuts and bolts of the business. But I'll argue that all they're doing is making the numbers look pretty. The company will still owe its interest and tax payments and will have to account for depreciation and amortization to comply with the accounting rules. So use EBITDA cautiously. And one more warning: Some folks use EBITDA to evaluate cash earnings. Don't do it. Stick with operating cash flow. Now, "ttm" means "trailing 12 months." So numbers from the past year are being used when calculating a particular financial ratio. For instance, you'll often see the price-to-earnings ratio quoted as "p/e (ttm)." That just means the earnings per share number from the past 12 months is used in the calculation. And "yoy" means "year over year." So you're comparing a number that's calculated today to the same number calculated exactly a year ago. Many times, revenue is reported "yoy." So if an earnings release says that second-quarter revenue increased on a year-over-year basis, that means revenue is up from the same time last year.
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